TIDMATG
RNS Number : 1345V
Auction Technology Group PLC
30 November 2023
AUCTION TECHNOLOGY GROUP PLC
FULL YEAR RESULTS FOR THE YEARED 30 SEPTEMBER 2023
Diversified revenue mix, created more value for customers and
executed against strategic levers
London, United Kingdom, 30 November 2023 - Auction Technology
Group plc ("ATG", "the Company", "the Group") (LON: ATG), operator
of world-leading marketplaces for curated online auctions, today
announces its financial results for the year ended 30 September
2023.
Financial results
FY23 FY22 Movement Organic(2)
Revenue(1&2) GBP135.2m GBP119.8m +13% +5%
Adjusted EBITDA(1) GBP64.0m GBP54.0m +19%
Adjusted EBITDA margin %(1) 47% 45% +2ppt
Operating profit GBP22.5m GBP16.8m +34%
Operating margin % 17% 14% +3ppt
Adjusted diluted earnings per share(1) 32.6p 29.5p +11%
Basic earnings/(loss) per share 13.9p (5.1)p +373%
Adjusted net debt(1) GBP115.7m GBP131.4m +GBP15.7m
Cash generated by operations GBP57.7m GBP49.4m +17%
--------------------------------------- --------- --------- --------- ----------
Financial highlights
-- Revenue of GBP135.2m, up 13%, driven by strong growth in
value-added services and further diversification of revenues,
contribution from EstateSales.NET ("ESN") and a favourable movement
in foreign exchange. Revenue up 5% and marketplace revenue up 6% on
an organic basis.
-- Adjusted EBITDA of GBP64.0m, up 19% year-on-year; adjusted
EBITDA margin of 47%, up 2ppt with high operational leverage driven
by growth in high-margin digital marketing and recurring event fee
revenue.
-- Operating profit of GBP22.5m, up 34% year-on-year and
includes the impact of exceptional items related to the ESN
acquisition, share-based payments, and intangible asset
amortisation.
-- Adjusted diluted earnings per share of 32.6p, up 11% as the
growth in adjusted EBITDA was partially offset by higher net
finance costs and an increase in the effective tax rate; basic
earnings per share of 13.9p compared to a loss of 5.1p, driven by
higher adjusted EBITDA and a deferred tax credit offsetting the
impact of higher net finance costs.
-- Adjusted net debt/adjusted EBITDA ratio significantly
improved to 1.8x from 2.4x 12 months ago as strong cash generation
more than offset financing for the acquisition of ESN. Closing
adjusted net debt reduced to GBP115.7m from GBP131.4m.
Operational highlights
-- Value-added services revenue up 27% at constant currency,
with multiple services contributing - strong adoption of paid-for
auctioneer digital marketing solutions, continued penetration of
atgPay across LiveAuctioneers and Proxibid, and successful launch
of atgShip, our new integrated shipping service, on
LiveAuctioneers. Value-added services now account for 18% of total
revenue.
-- Strong growth of event fees and value-added services drove an
increase in the take rate3, up 0.3ppt to 3.6%.
-- Total Hammer Value3 ("THV") up 3% at constant currency to
GBP10.8bn for the full year, with a small decline in THV in the
second half year-on-year impacted by the normalisation of
Industrial & Commercial ("I&C") asset prices and
exceptional activity in the prior year, and by a softening in Art
& Antiques ("A&A") auction markets.
-- Gross Merchandise Value3 ("GMV") declined 3% at constant
currency, impacted by slowdown in THV and the commercial decision
to rotate volume with high service requirements and minimal revenue
contribution. Excluding this impact, GMV would be flat and
conversion rate would be down 1ppt year-on-year reflecting the
physical auction reopening impact post the Covid-19 pandemic.
-- Progress on single technology platform programme including
value-added services modules in addition to the launch and roll out
of integrated bidding, which enables timed auctions to be
concurrently held across ATG marketplaces and on an ATG white
label.
-- Consolidation of North American operations to streamline
decision making and to drive operational leverage and
efficiency.
-- Successful acquisition of ESN, a leading US estate sales
platform, expanding our addressable market and adding a new pool of
bidders; integration on track and business performing ahead of
initial business case.
-- Progress against ESG programmes including pledge to achieve
Net zero emissions by 2040.
1. The Group provides alternative performance measures ("APMs")
which are not defined or specified under the requirements of
UK-adopted International Accounting Standards. We believe these
APMs provide readers with important additional information on our
business and aid comparability. We have included a comprehensive
list of the APMs in note 3 to the Consolidated Financial
Statements, with definitions, an explanation of how they are
calculated, why we use them and how they can be reconciled to a
statutory measure where relevant.
2. The Group has made certain acquisitions that have affected
the comparability of the Group's results. To aid comparisons
between FY23 and FY22, organic revenue has been presented to
exclude the acquisition of EstateSales.NET on 6 February 2023.
Organic revenue is shown on a constant currency basis using average
exchange rates for the current financial period applied to the
comparative period and is used to eliminate the effects of
fluctuations in assessing performance.
3. Refer to glossary for full definition of the terms. GMV and
Take Rate exclude the impact of the acquisition of ESN.
John-Paul Savant, Chief Executive Officer of Auction Technology
Group plc, said:
"We have continued to deliver a robust financial performance and
to execute well against each of our six strategic growth drivers.
We have streamlined our operating model to accelerate the speed
with which we make decisions. As ATG continues to lead the
transformation of the auction industry, we are focused on what our
auctioneer partners and our bidders care about most: raising the
experience of buying at auction to eCommerce standards by investing
in the user experience, including payments, shipping and timed
auction formats. The goal is to expand the pool of online bidders
by removing friction points and, in so doing, to drive higher asset
values for auctioneers and their consignors. We continue to make
good progress both organically and via acquisition, with our
successful integration of ESN highlighting yet again our unique
opportunity for accretive inorganic growth within the fragmented
secondary goods market.
"Whilst the macroeconomic environment has become more
challenging and impacted our rate of growth in the second half, we
are strengthening our core proposition with the introduction of
revenue streams that are less correlated with sector trends. The
strength of our marketplace business leadership and traction in our
value-added services such as atgPay and atgShip, provide long
runways for growth."
Current trading and outlook
THV and GMV growth have been impacted by macroeconomic factors
over the course of the year. In the short term, the business
continues to be impacted by underlying market growth which remains
relatively uncertain. Offsetting this is the benefit that the
Company is seeing from the growth of value-added services, which
when combined with the external factors, leads to a FY24 organic
revenue growth outlook of between 5% to 8%. Total revenue growth
for FY24 will be higher than the organic growth rate due to the
positive contribution of ESN. We expect to maintain our adjusted
EBITDA margin.
Webcast presentation
There will be a webcast presentation this morning at 9.30am.
Please contact ATG@teneo.com if you would like to attend.
For further information, please contact:
ATG
For investor enquiries rebeccaedelman@auctiontechnologygroup.com
For media enquiries press@auctiontechnologygroup.com
Deutsche Numis +44 207 260 1000
(Joint corporate broker to ATG)
Nick Westlake, William Baunton,
Tejas Padalkar
J.P. Morgan Cazenove +44 207 742 4000
(Joint corporate broker to ATG)
Bill Hutchings, James Summer, Will
Vanderspar
Teneo Communications +44 207 353 4200
(Public relations advisor to ATG) ATG@teneo.com
Tom Murray, Matt Low, Arthur Rogers
About Auction Technology Group plc
Auction Technology Group plc ("ATG") is the operator of world
leading marketplaces and auction services for curated online
auctions, seamlessly connecting bidders from around the world to
around 4,000 trusted auction houses across two major sectors:
Industrial & Commercial ("I&C") and Art & Antiques
("A&A").
The Group powers eight online marketplaces and listing sites
using its proprietary auction platform technology, hosting just
under 86,000 live and timed auctions each year. ATG has been
supporting the auction industry since 1971 and the Group has
offices in the UK, US and Germany.
CAUTIONARY STATEMENT The announcement may contain
forward-looking statements. These statements may relate to (i)
future capital expenditures, expenses, revenues, earnings,
synergies, economic performance, indebtedness, financial condition,
dividend policy, losses or future prospects, and (ii) developments,
expansion or business and management strategies of the Company.
Forward-looking statements are identified by the use of such terms
as "believe", "could", "should", "envisage", "anticipate", "aim",
"estimate", "potential", "intend", "may", "plan", "will" or
variations or similar expressions, or the negative thereof. Any
forward-looking statements contained in this announcement are based
on current expectations and are subject to known and unknown risks
and uncertainties that could cause actual results to differ
materially from those expressed or implied by those statements. If
one or more of these risks or uncertainties materialise, or if
underlying assumptions prove incorrect, the Company's actual
results may vary materially from those expected, estimated or
projected. No representation or warranty is made that any
forward-looking statement will come to pass. Any forward-looking
statements speak only as at the date of this announcement. The
Company and its directors expressly disclaim any obligation or
undertaking to publicly release any update or revisions to any
forward-looking statements contained in this announcement to
reflect any change in events, conditions or circumstances on which
any such statements are based after the time they are made, other
than in accordance with its legal or regulatory obligations
(including under the UK Listing Rules and the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority). Nothing
in this announcement shall exclude any liability under applicable
laws that cannot be excluded in accordance with such laws.
LEI Number: 213800U8Q9K2XI3WRE39
CEO REVIEW
Amidst a year with macroeconomic uncertainty, I am pleased to
report that ATG delivered another year of growth, with total
revenues up 13% to GBP135.2m, and of strong operational
performance, with adjusted EBITDA rising 19% year-on-year to
GBP64.0m. We successfully acquired a new important asset with the
purchase of ESN in February and despite that, we significantly
strengthened our balance sheet, with our leverage ratio decreasing
from 2.4x to 1.8x, reflecting strong cash flow. In FY23, we are
pleased to have made progress against each of our strategic growth
drivers.
The long-term opportunities for ATG are significant, given the
critical role of the auction industry and ATG's ability to lead its
online transformation. Buying and selling secondary items enhances
sustainability and accelerates the growth of the circular economy,
factors that are of increasing importance to both professional and
consumer buyers. Purchasing secondary items via auctions represents
the best way to ensure total price transparency, addressing a key
objective of buyers to pay a fair price and for sellers to achieve
the maximum fair price possible. The auction industry remains in
the early stages of its online transformation, with standards of
user-experience still behind that of e-commerce. The opportunity
and challenge for ATG is to make it easier to buy at auction and to
alleviate points of friction when buying on our marketplaces. We
are extending the penetration of atgPay, which removes a pain point
for auctioneers whilst increasing convenience and confidence for
bidders. We have developed new unique auction formats and multiple
tiers of service to drive operational efficiency for auctioneers
and increase choice for bidders. Most recently, we launched
atgShip, an integrated shipping solution, to further elevate the
online auction experience and drive the conversion rate over the
medium term. As a result of these investments, I believe we are
approaching a tipping point, where the services and user experience
offered by our marketplaces will encourage a wider pool of buyers
to buy at online auction, whilst also incentivising auctioneers to
use ATG as their sole service provider to access the online
market.
1. Expand the total addressable market
Against an uncertain macroeconomic backdrop and following years
of accelerated growth during the Covid-19 period, THV on our
marketplaces grew 3% at constant currency to just under GBP11bn.
Our marketplaces facilitated just under 86,000 auctions, a 16%
increase year-on-year, and we grew our auctioneer base to over
3,900 as we welcomed new auctioneers while maintaining a high
auctioneer retention rate. New auctioneers included Sotheby's, a
world leading auctioneer for art and luxury goods, who have begun
listing a number of catalogues on our marketplaces. All the 'Big 4'
Art & Antique auctioneers now use ATG's marketplaces in some
form, highlighting the attractiveness of our bidder reach, for even
the large global auctioneers. Our marketplaces saw a 10% increase
in the number of lots listed in FY23 to over 22m, highlighting
auctioneers continued trust in ATG as their preferred platform to
access the online market.
In the second half, THV declined 5% at constant currency,
impacted by the normalisation of used equipment prices in some
I&C categories, following elevated pricing in prior years
driven by shortages of primary equipment, as well as a softening of
A&A market activity impacted by a weaker consumer macroeconomic
environment.
The acquisition of ESN further expanded our reach into a new
segment of the secondary goods market, with estate sales
representing an estimated $5 billion annual market in North America
alone. Since acquisition, ESN has attracted even more estate
sellers, with 4,800 active organisations on the platform as at the
end of September, up 4% year-on-year.
2. Grow the conversion rate
The Group conversion rate at 31% decreased 2ppt year-on-year.
The rate was impacted by auctioneers re-opening physical auctions
post the Covid-19 period and also by the mix of auctioneers on our
marketplaces, with an increase in the proportion of new and
international auctioneers who bring new THV but initially have a
lower conversion rate. Conversion was also impacted by the
commercial decision to rotate volume with high service requirements
and minimal revenue contribution, for lower levels of volume, but
which has a higher future revenue potential. Excluding the impact,
the Group conversion rate would have been down 1ppt year-on-year
and stabilised in the second half, after the end of the
annualisation of the Covid-19 period.
We have continued to make investments which we expect will help
to grow our conversion rate in the medium term. On the bidder side,
we have improved our search engine optimisation through a revised
site navigation and site taxonomy, as well as new lot-focused
category pages that help bidders to find what they are looking for
more easily. Since the launch of these pages in the fourth quarter,
GMV generated from search engines has increased by 12%. We have
launched new SMS programmes on The Saleroom, including a watch list
reminder, which helped to drive over 100,000 bids placed from a SMS
reminder. On the seller side, we have continued to facilitate the
shift to timed online-only auctions including through updated
pricing structures, that create economic incentives to switch to a
timed auction format. This updated pricing structure was introduced
on Proxibid in March and rolled out on The Saleroom at the start of
FY24. From a product perspective, we know that many auctioneers
want to retain their own brand presence whilst running a timed
auction. Through our integrated bidding programme, we offer Timed+,
the unique ability to run a timed online-only auction on our
marketplace and simultaneously on an ATG white label.
3. Enhance the network effect
Over the past year, we have hosted over 188m bidding sessions on
our marketplaces, up 9% year-on-year, in addition to a further 150m
hosted on ESN. On ATG marketplaces, there were 1.6m new bidding
accounts registered, up 12% year-on-year, and over 11m auction
registrations. With this scale and reach, we are now focused on
executing on enhancing the network effect across our marketplaces
by enabling cross-listing on any of our marketplaces through our
integrated bidding programme. Cross-listing offers bidders the
widest selection of inventory easily accessed on an ATG
marketplace. We launched Timed+ in March, which offers integrated
bidding on timed online-only auctions on LiveAuctioneers and
Auction Mobility. We further developed the integrated bidding
solution to be used across our other marketplaces and ATG white
label products with launch in early FY24. Since launch, auctions
run on Timed+ have resulted in a double-digit asset price uplift
versus if the auction was listed on Auction Mobility alone. We are
now focused on making it easier for auctioneers to cross-list on
multiple marketplaces seamlessly.
4. Expand operational leverage
ATG has an attractive financial model with high operational
leverage and low capital intensity. In FY23, we grew our adjusted
EBITDA margin by 2ppt to 47%. In the year, we increased listing
fees across our platforms and we progressed against our single
technology platform including the roll out of our integrated
bidding programme. We reorganised our North America business with
the consolidation of our North America I&C and A&A
commercial teams. This organisation change aligns with our platform
strategy to expand operational leverage by centralising costs and
improving scalability. We are exploring AI solutions and how they
can lead to increased personalisation for our users, better
descriptions for our sellers, and better service provided by
ATG.
5. Grow the take rate via value-added services
In FY23, the Group take rate increased 0.3ppt to 3.6%,
benefiting from the growth of value-added services where revenue
grew 27% on a constant currency basis. Value-added services now
accounts for 18% of total revenue, versus 9% three years ago.
Marketing adoption continues to be a key growth driver for us with
59% of auctioneers using a marketing solution. We have continued to
roll out new marketing assets including search advertising units
and email segmentation as well as increasing our social media
investments. We increasingly offer self-serve features as well as
marketing subscription packages which provides us with significant
opportunity to continue to grow marketing revenue beyond its
current penetration at 0.5% of GMV.
Onboarding of auctioneers to atgPay has continued to progress
with 91% of US based LiveAuctioneers and 38% of Proxibid
auctioneers onboarded by the end of September. 61% of
LiveAuctioneers' US Gross Transaction Value was transacted through
atgPay in September, and we expect this to increase in FY24 as we
roll out autopay on the marketplace. Activation of auctions with
atgPay on Proxibid began in the third quarter and we have seen an
improving rate of usage towards the end of the year, as we have
continued to upgrade the product functionality.
We are very pleased with the launch of atgShip, an integrated
shipping solution for LiveAuctioneers, where we have partnered with
professional shipping services to provide a hassle-free solution.
Just under 150 auctioneers had been onboarded by the end of the
year, with over 1,500 lots shipped in the two-month trial. The
service is now being rolled out across the LiveAuctioneers
marketplace.
6. Pursue accretive M&A
In February, we acquired ESN for a purchase price of $40m. The
acquisition highlights ATG's opportunity to pursue accretive
acquisitions in the fragmented used goods market and access
synergies that are unique to ATG. Since acquisition, ESN has
performed ahead of initial expectations, partly driven by growth in
both the number of buyers and sellers on the listing site,
including 121,000 net new subscribers joining ESN in FY23 taking
the total number of subscribers to 1.1m. Growth has also been
driven by strong execution against strategic initiatives, including
the roll out of new marketing solutions with an increase in both
the adoption and the quantity of advertising units, as well as an
updated pricing structure for the site. For FY24, we continue to
see opportunities to further optimise the listing site whilst also
executing on the cross-selling opportunities between ATG's 188m web
sessions and ESN's 150m web sessions.
Progress against our ESG programmes
I am very proud of the progress we have made against our ESG
strategy in FY23. We continue to look for ways to reduce our own
environmental impact, and in FY23 we reduced our Scope 1 and 2
emissions by 26%, facilitated by the relocation of our Proxibid
office to a smaller and more energy-efficient location. We have set
up employee-led groups to discuss and champion ways to reduce our
environmental impact further, whilst also improving our external
reporting disclosures for a wider range of environmental KPIs. We
are also committing to achieving Net zero as a Group by 2040. On
social programmes, we launched All ToGether, our connection and
development programme, which includes the ATG Academy and our new
learning and developing courses, with over 60 training courses
having been run in the year. Our newly launched ATG Values
encompass everything that we do, driving the way ATG operates with
a winning team made up of smart, passionate individuals who are
connected to our purpose. We have also strengthened our governance
frameworks including a new information security system which has
been based on a recognised international standard.
Summary
Whilst the macroeconomic environment has become more
challenging, ATG has been able to continue to deliver robust
growth, supported by our increasingly diversified and resilient
business model. With many of our strategic programmes, such as
shipping and payments still early in their roll out, I have
confidence that we can continue to grow and to monetise more of the
opportunity in the fragmented online auction market. ATG's market
position, track record, team and sustainable shared success model
leave us very well positioned to continue to deliver value for all
our stakeholders.
John-Paul Savant
Chief Executive Officer
CFO REVIEW
Group presentation of results
The financial results for FY23 are presented for the year ended
30 September 2023. On 6 February 2023, the Group completed its
acquisition of Vintage Software LLC., trading as EstateSales.NET
("ESN"), for a consideration of $40m. The results for ESN are
included within the A&A operating segment in FY23. Full details
of the accounting implications are detailed in note 9 of the
Consolidated Financial Statements.
The impact of the acquisition affects the comparability of the
Group's results. Therefore, to aid comparisons between FY22 and
FY23 organic revenue growth is presented to exclude the acquisition
of ESN on 6 February 2023. Organic revenue is shown on a constant
currency basis, using average exchange rates for the current
financial period applied to the comparative period and is used to
eliminate the effects of fluctuations in assessing performance.
Note 3 of the Consolidated Financial Statements includes a full
reconciliation of all APMs presented to the reported results for
FY23 and FY22.
Given that a significant majority of the Group's revenue, costs
and cash flows are now generated in US dollars, for financial
periods beginning on or after 1 October 2023, the Group will change
the presentational currency in which the Group presents its
consolidated financial results from pound sterling to US dollars.
FY23 consolidated financial results presented in US dollars are
available on our website at www.auctiontechnologygroup.com
Revenue
FY23 FY22 Movement Movement
GBPm GBPm Reported Organic
-------------------------------- ----- ----- --------- --------
Art & Antiques ("A&A") 65.6 55.3 19% 6%
Industrial & Commercial ("I&C") 58.2 52.7 10% 7%
-------------------------------- ----- ----- --------- --------
Total marketplace 123.8 108.0 15% 6%
Auction Services 8.3 8.6 (3)% (7)%
Content 3.1 3.2 (3)% (3)%
-------------------------------- ----- ----- --------- --------
Total 135.2 119.8 13% 5%
-------------------------------- ----- ----- --------- --------
Group
Group revenue increased 13% year-on-year to GBP135.2m, driven by
growth in marketplace revenue, a favourable movement in the foreign
exchange rate and the acquisition of ESN. On an organic basis,
revenue grew 5%, driven by the growth in value-added services
revenue and event fees which offset a 3% reduction in GMV on our
marketplaces. Commission revenue on our marketplaces was flat
year-on-year. Marketplace revenue growth was partially offset by
revenue declines on an organic basis in Auction Services and
Content.
Art & Antiques
Revenue in the A&A segment increased 19% to GBP65.6m, up 6%
on an organic basis predominantly driven by the increase in the
take rate by 0.6ppt to 8.6%. This increase was the result of growth
in value-added services adoption, including marketing and payments,
in addition to a small contribution from the newly launched
shipping product, as well as price increases in event fees. GMV
across A&A declined 3% at constant currency impacted by both
challenging comparisons in the first half of the year when the
prior year had benefited from the Covid-19 pandemic and a slowdown
in the A&A auction market in the second half of the year, with
A&A THV up 1% for FY23 and down 2% in the second half. ESN
delivered double-digit revenue growth, ahead of plan, driven by
sustained growth in the estate sales subscribers on the site, an
increase to our pricing structure and the growth of marketing
revenue on ESN. The ESN contribution to the FY23 results was from
the date of acquisition on 6 February 2023.
Industrial & Commercial
I&C revenue grew 10% on a reported basis to GBP58.2m and 7%
on an organic basis, driven by a 0.2ppt increase in the take rate
to 2.2% that offset a decline in GMV in the second half. The take
rate improvement was driven by the continued growth in the adoption
and penetration of marketing solutions, the launch of atgPay on
Proxibid, which was activated on the marketplace in the second half
of FY23, and the updated pricing structure on Proxibid which was
rolled out from March 2023. GMV declined 3%, impacted by a
reversion of used asset prices in some I&C categories in the
second half of the year following the easing of supply chain
constraints in the primary market. GMV was also impacted by the
commercial decision to switch out volume with high service
requirements and minimal revenue contribution, but which has higher
future revenue potential. Excluding this impact, GMV would have
been up 1% year-on-year. Total I&C GMV remains 247% higher than
it was pre-pandemic in FY19 reflecting the attractiveness of our
business model.
Auction Services
Auction Services revenue of GBP8.3m declined 3% on a reported
basis and 7% on an organic basis. Revenue was impacted by a shift
of auction activity away from the white label channel year-on-year
and back to physical auctions. In FY23, we have begun to better
integrate our white label solutions with ATG marketplaces through
the launch of our integrated bidding solutions. We would expect
this to result in ATG increasingly becoming the preferred provider
for white label solutions.
Content
Content revenue declined 3% to GBP3.1m, as expected, driven by
the ongoing fall in advertising volumes as auctioneers increasingly
migrate their marketing spend to the online channel.
Financial performance
Reported
---------------------------------------------
FY23 FY22
GBPm GBPm Movement
--------------------------------------------- ------ ------ --------
Revenue 135.2 119.8 13%
Cost of sales (43.5) (40.1) 8%
--------------------------------------------- ------ ------ --------
Gross profit 91.7 79.7 15%
--------------------------------------------- ------ ------ --------
Administrative expenses (69.8) (63.6) 10%
Other operating income 0.6 0.7 (14)%
--------------------------------------------- ------ ------ --------
Operating profit 22.5 16.8 34%
--------------------------------------------- ------ ------ --------
Adjusted EBITDA (as defined in note 3) 64.0 54.0 19%
--------------------------------------------- ------ ------ --------
Finance income 0.2 2.1 (90)%
Finance cost (15.6) (9.6) (63)%
--------------------------------------------- ------ ------ --------
Net finance costs (15.4) (7.5) (105)%
--------------------------------------------- ------ ------ --------
Profit before tax 7.1 9.3 (24)%
Income tax 9.8 (15.4) 164%
--------------------------------------------- ------ ------ --------
Profit/(loss) for the period attributable to
the equity holders of the Company 16.9 (6.1) 377%
--------------------------------------------- ------ ------ --------
Operating profit
The Group reported an operating profit of GBP22.5m compared to
GBP16.8m in the prior year, driven by the increase in gross profit
which offset the impact from an increase in year-on-year
administrative expenses.
Gross profit increased 15% to GBP91.7m, with the gross profit
margin increasing 1ppt year-on-year, which reflects the revenue
growth and a high flow-through of revenue to gross profit. The
Group's administrative expenses increased by GBP6.2m to GBP69.8m.
This increase includes GBP2.7m of one-off exceptional costs related
to the acquisition of ESN (FY22: Nil) and a GBP1.8m increase in
share-based payments to GBP7.0m, including the impact of annual
grants awarded in December 2022 and one-off awards for certain
members of the Senior Management Team. We expect the share-based
payment expense to broadly stabilise going forward. The movement in
administrative expenses also includes the impact of foreign
exchange movement as well as investments in the business to support
future growth.
Adjusted EBITDA
Adjusted EBITDA definitions and reconciliations to the reported
results are presented in note 3 of the Consolidated Financial
Statements.
Adjusted EBITDA increased from GBP54.0m to GBP64.0m
year-on-year. Adjusted EBITDA margin increased by 2ppt to 47% due
to the growth in high margin marketing and fixed fee revenue and
cost management which offset the contribution from lower margin
payments revenue growth as well as the impact from ongoing
investments in products and services to support future growth.
Net finance costs
Net finance costs were GBP15.4m compared to net finance costs of
GBP7.5m in FY22 and include the impact of a GBP4.1m non-cash
foreign exchange loss in FY23 versus a GBP2.1m non-cash foreign
exchange gain in FY22 related to intergroup balances. Excluding
this impact, as well as excluding the impact from a GBP1.6m
year-on-year decrease in the deferred consideration, net finance
costs increased GBP3.3m year-on-year. The increase primarily
relates to higher interest costs on our US dollar denominated
Senior Term Facility, due to the increase in the Secured Overnight
Financing Rate ("SOFR") and the movement in foreign exchange,
offsetting a lower level of borrowings. Our average interest rate
for the year increased from 4% to 8%. During the year, the Group
pre-paid $53.7m of its Senior Term Facility, in addition to
repaying $26.3m on the Revolving Credit Facility ("RCF") that was
drawn in the year to fund the ESN acquisition. In the prior year,
finance costs related to interest costs on our Senior Term
Facility, commitment fees, foreign exchange gains and movement in
the contingent consideration. Finance income of GBP0.2m primarily
relates to interest income in the year (FY22: GBP2.1m including the
foreign exchange gain). The Group expects a small increase to net
finance costs excluding the impact of foreign exchange in FY24
reflecting a higher average interest rate offsetting a lower loan
balance.
Profit before tax
After the impact of higher net finance costs year-on-year due to
the rising SOFR rates and the movement in foreign exchange, the
Group reported a profit before tax of GBP7.1m (FY22: GBP9.3m).
Taxation
The overall tax credit for the year was GBP9.8m (FY22: GBP15.4m
expense), arising from the profit in the year and a deferred tax
credit on unrealised foreign exchange differences and
non-deductible foreign exchange differences on intergroup loan
balances. The unrealised foreign exchange differences were not
recognised in the Group's profit for the year due to differences in
the functional currency basis under tax and accounting rules for
the US holding entities. The Group's effective tax rate for FY23
was a credit of 137% (FY22: 166%) is higher than the UK tax rate
(19% until April 23 and 25% thereafter) due to the net impact of
allowable deductions for the exercise of share options and the
deferred tax liability on the foreign exchange movements in the
year. The tax rate on adjusted earnings of 16% increased from 15%
in the prior year, partly reflecting the increase in the UK
corporate tax rate, our primary tax jurisdiction. The Group expects
the tax rate on adjusted earnings to increase to 19% in FY24, in
line with the higher UK tax rate. The Group is committed to paying
its fair share of tax and manages tax matters in line with the
Group's Tax Strategy, which is approved by the Board and is
published on our website www.auctiontechnologygroup.com .
Earnings/(loss) per share and adjusted earnings per share
Basic and diluted earnings per share was 13.9p and 13.8p
respectively compared to a loss of 5.1p in FY22, as a tax credit
offset lower profit before tax year-on-year. The weighted average
number of shares during the period was 122.2m (FY22: 120.3m
shares), with the increase year-on-year due to the impact of vested
equity incentive awards.
Adjusted diluted earnings per share was 32.6p compared to 29.5p
in FY22 and is based on profit after tax adjusted to exclude
share-based payment expense, exceptional items (operating and
finance costs), amortisation of acquired intangible assets and any
related tax effects. The increase year-on-year is due to the
increase in adjusted EBITDA, partially offset by higher net finance
costs, an increase in the effective tax rate due to an increase in
the UK tax rate and an increase in the weighted average number of
ordinary shares and dilutive options in the year.
A reconciliation of the Group's profit after tax to adjusted
diluted earnings per share is set out in note 3.
EstateSales.NET acquisition
On 6 February 2023, the Group acquired 100% of the equity share
capital of Vintage Software LLC, trading as EstateSales.NET
("ESN"), for total consideration of $40m funded out of the Group's
existing cash balance and debt facilities. ESN is a leading estate
sales listing site in the US and the purpose of the acquisition was
to access an adjacent channel in the resale of secondary goods and
to enable cross-selling opportunities for the Group. The full
acquisition accounting is detailed in note 9.
Foreign currency impact
The Group's reported performance is sensitive to movements in
both the US dollar and the euro against the pound sterling with a
mix of revenues included in the table below.
FY23 FY22
Revenue GBPm GBPm
--------------- ----- -----
United Kingdom 19.7 18.5
North America 111.6 97.8
Germany 3.9 3.5
--------------- ----- -----
Total 135.2 119.8
--------------- ----- -----
The average FY23 exchange rate of pound sterling against the US
dollar weakened by 3.1% and by 2.5% against the euro compared to
FY22, as shown in the table below.
Average rate Closing rate
---------- --------------------
FY23 FY22 Movement FY23 FY22 Movement
---------- ---- ---- -------- ---- ---- --------
Euro 1.15 1.18 (2.5)% 1.15 1.13 1.8%
US dollar 1.23 1.27 (3.1)% 1.22 1.12 8.9%
---- ---- -------- ---- ---- --------
When comparing revenue in FY22 to FY23, changes to average
foreign exchange rates had a favourable impact on revenue of
GBP3.2m. Partially offsetting this, changes to foreign exchange
rates had an unfavourable movement on the Group's cost of sales and
administrative expenses of GBP2.5m when compared to FY22.
The tax for the period was also significantly impacted by
movements in foreign currency exchange rates, resulting in a
reduction to the tax charge of GBP9.7m. The strengthening of the
pound sterling against the US dollar over the year has given rise
to a loss of GBP42.4m on assets held and gain on the external
dollar loan of GBP11.6m. A net loss of GBP30.5m has been recognised
in the foreign currency reserve.
For FY24, the Group will change the presentational currency in
which the Group presents its consolidated financial results from
pound sterling to US dollars.
Statement of financial position
Overall net assets at 30 September 2023 have decreased by
GBP9.3m to GBP530.0m since 30 September 2022. Total assets
decreased by GBP80.9m, largely driven by the strengthening of pound
sterling against the US dollar at the year end which has reduced
total assets by GBP53.5m. There has been a GBP47.9m cash outflow
related to the prepayment of our Senior Term Facility, net of the
drawdown to fund the ESN acquisition. Goodwill, intangible and
tangible assets increased due to goodwill and intangible asset
additions of GBP33.0m acquired with ESN and other additions of
GBP8.7m, net of the amortisation charge for the year of GBP30.4m.
The Group's goodwill and intangibles were tested for impairment at
30 September 2023 and no impairment was recognised, although the
A&A and Auction Services cash-generating units remain sensitive
to the key assumptions used in the model. Refer to note 10 for
further details.
Total liabilities decreased by GBP71.6m, primarily due to a
reduction in loans and borrowings of GBP59.0m, a decrease in
deferred tax liabilities of GBP23.9m, largely driven by the
movement on the unrealised foreign exchange differences and the
unwind of the capitalised acquisition intangible assets, and an
increase in creditors of GBP7.6m due to the impact of the deferred
consideration.
Cash flow and adjusted net debt
The Group generated strong cash from operations at GBP57.7m
(FY22: GBP49.4m), driven by high margin revenue growth which offset
higher cash interest cost year-on-year. The movement in working
capital reflects the timing of auction activity, the size and
timing of performance related payments and growth in the business.
The GBP4.5m increase in additions to internally generated software
primarily relates to our programme to migrate to a single
technology platform as well as investment on new products such as
payments. Total expenditure on additions to internally generated
software and payment for property, plant and equipment was GBP9.3m,
in line with our guidance.
Adjusted net debt as at 30 September 2023 was GBP115.7m, a
decrease from GBP131.4m as at 30 September 2022 as strong operating
cash flow generation more than offset the impact of the acquisition
of ESN, additions to internally generated software and foreign
exchange movements. The Group had cash at bank of GBP6.1m and
borrowings of GBP121.8m as at 30 September 2023 (30 September 2022:
cash at bank of GBP49.4m and borrowings of GBP180.8m). During the
year, the Group paid $53.7m of its Senior Term Facility, in
addition to repaying $26.3m on the RCF that had been drawn in the
year to fund the ESN acquisition. The adjusted net debt/adjusted
EBITDA ratio decreased from 2.4x as at 30 September 2022 to
1.8x.
The Group's adjusted free cash flow was GBP49.9m (FY22:
GBP49.9m), a conversion rate of 78.0% (FY22: 92.5%). The decrease
in conversion rate reflects the timing of auction activity, working
capital movement as well as an increase in additions to internally
generated software. A reconciliation of cash generated from
operations to adjusted free cash flow and adjusted free cash flow
conversion is included in note 3 of the Consolidated Financial
Statements.
FY23 FY22
GBPm GBPm
------------------------------------------------- ----- -----
Adjusted EBITDA 64.0 54.0
------------------------------------------------- ----- -----
Cash generated from operations 57.7 49.4
Adjustments for:
Exceptional items 2.7 -
Working capital from exceptional and other items (1.2) 5.0
Additions to internally generated software (8.7) (4.2)
Additions to property, plant and equipment (0.4) (0.3)
Payment for right of use assets (0.2) -
------------------------------------------------- ----- -----
Adjusted free cash flow 49.9 49.9
------------------------------------------------- ----- -----
Adjusted free cash flow conversion 78.0% 92.5%
Dividends
As per the Group's dividend policy, the Group sees strong growth
opportunities through organic and inorganic investments and, as
such, intends to retain any future earnings to finance such
investments. The Company will review its dividend policy on an
ongoing basis but does not expect to declare or pay any dividends
for the foreseeable future. Therefore, no dividends have been paid
or proposed for FY23 or FY22.
Post balance sheet events
There were no post balance sheet events.
Related parties
Related party disclosures are detailed in note 15 to the
Consolidated Financial Statements.
Going concern
In assessing the appropriateness of the going concern
assumption, the Directors have considered the ability of the Group
to meet the debt covenants and maintain adequate liquidity through
the forecast period. The Group's forecasts and projections, taking
account of reasonably possible changes in trading performance, show
that the Group is able to operate comfortably within the level of
its current facilities and meet its debt covenant obligations.
Sensitivities have been modelled to understand the impact of the
various risks outlined above on the Group's performance and the
Group's debt covenants/cash headroom, including consideration of a
reasonable downside scenario. Given the current demand for services
across the Group at the date of this report, the assumptions in
these sensitivities, when taking into account the factors set out
above, are considered to be unlikely to lead to a debt covenant
breach or liquidity issues under both scenarios.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and that it
remains appropriate to continue to adopt the going concern basis in
preparing the financial information.
Tom Hargreaves
Chief Financial Officer
C onsolidated Statement of Profit or Loss and Other
Comprehensive Income or Loss
for the year ended 30 September 2023
Year ended Year ended
30 September 30 September
2023 2022
Note GBP000 GBP000
------------------------------------------------------ ---- ------------- -------------
Revenue 4,5 135,225 119,846
Cost of sales (43,481) (40,101)
------------------------------------------------------ ---- ------------- -------------
Gross profit 91,744 79,745
Administrative expenses (69,724) (63,646)
Other operating income 556 718
------------------------------------------------------ ---- ------------- -------------
Operating profit 22,576 16,817
------------------------------------------------------ ---- ------------- -------------
Finance income 6 181 2,127
Finance costs 6 (15,611) (9,665)
------------------------------------------------------ ---- ------------- -------------
Net finance costs 6 (15,430) (7,538)
------------------------------------------------------ ---- ------------- -------------
Profit before tax 7,146 9,279
Income tax 7 9,792 (15,406)
------------------------------------------------------ ---- ------------- -------------
Profit/(loss) for the year attributable to the
equity holders of the Company 16,938 (6,127)
------------------------------------------------------ ---- ------------- -------------
Other comprehensive (loss)/income for the year
attributable to the equity holders of the Company
Items that may subsequently be transferred to profit
and loss:
Foreign exchange differences on translation of
foreign operations (42,378) 86,126
Fair value gain/(loss) arising on hedging instruments
during the year 11,841 (16,173)
Tax relating to these items 7 (2,606) 3,074
------------------------------------------------------ ---- ------------- -------------
Other comprehensive (loss)/income for the year,
net of income tax (33,143) 73,027
------------------------------------------------------ ---- ------------- -------------
Total comprehensive (loss)/income for the year
attributable to the equity holders of the Company (16,205) 66,900
------------------------------------------------------ ---- ------------- -------------
Earnings/(loss) per share P p
Basic 8 13.9 (5.1)
Diluted 8 13.8 (5.1)
------------------------------------------------------ ---- ------------- -------------
The above results are derived from continuing operations.
Consolidated Statement of Financial Position
as at 30 September 2023
30 September 30 September
2023 2022
Note GBP000 GBP000
------------------------------------- ---- ------------ ------------
ASSETS
Non-current assets
Goodwill 10 474,315 488,978
Other intangible assets 10 221,112 246,475
Property, plant and equipment 734 526
Right of use assets 3,231 1,714
Trade and other receivables 113 90
------------------------------------- ---- ------------ ------------
Total non- current assets 699,505 737,783
------------------------------------- ---- ------------ ------------
Current assets
Trade and other receivables 17,894 15,790
Tax asset 101 1,565
Cash and cash equivalents 11 8,539 51,817
------------------------------------- ---- ------------ ------------
Total current assets 26,534 69,172
------------------------------------- ---- ------------ ------------
Total assets 726,039 806,955
------------------------------------- ---- ------------ ------------
LIABILITIES
Non-current liabilities
Loans and borrowings 12 (108,969) (149,862)
Tax liabilities (800) (1,074)
Lease liabilities (2,656) (1,094)
Deferred tax liabilities 13 (40,689) (64,618)
------------------------------------- ---- ------------ ------------
Total non-current liabilities (153,114) (216,648)
------------------------------------- ---- ------------ ------------
Current liabilities
Trade and other payables (26,407) (18,780)
Loans and borrowings 12 (12,861) (30,983)
Tax liabilities (3,098) (475)
Lease liabilities (599) (746)
------------------------------------- ---- ------------ ------------
Total current liabilities (42,965) (50,984)
------------------------------------- ---- ------------ ------------
Total liabilities (196,079) (267,632)
------------------------------------- ---- ------------ ------------
Net assets 529,960 539,323
------------------------------------- ---- ------------ ------------
EQUITY
Share capital 14 12 12
Share premium 14 236,231 235,903
Other reserve 14 238,385 238,385
Capital redemption reserve 5 5
Share option reserve 23,485 34,690
Foreign currency translation reserve 36,203 66,740
Retained losses (4,361) (36,412)
------------------------------------- ---- ------------ ------------
Total equity 529,960 539,323
------------------------------------- ---- ------------ ------------
Consolidated Statement of Changes in Equity
for the year ended 30 September 2023
Foreign
Capital Share currency
Share Share Other redemption option translation Retained Total
capital premium reserve reserve reserve reserve losses equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---- -------- -------- -------- ----------- -------- ------------ -------- --------
1 October 2021 12 235,903 238,385 5 1,649 (3,213) (33,287) 439,454
Loss for the year - - - - - - (6,127) (6,127)
Other comprehensive
income - - - - - 69,953 3,074 73,027
------------------------- ---- -------- -------- -------- ----------- -------- ------------ -------- --------
Total comprehensive
income/(loss)
for the year - - - - - 69,953 (3,053) 66,900
Transactions with owners
Options issued as
consideration
for a business
combination,
net of transaction costs
and tax - - - - 28,346 - - 28,346
Share-based payments - - - - 4,695 - 78 4,773
Income tax relating to
items taken directly to
equity 7 - - - - - - (150) (150)
------------------------- ---- -------- -------- -------- ----------- -------- ------------ -------- --------
30 September 2022 12 235,903 238,385 5 34,690 66,740 (36,412) 539,323
Profit for the year - - - - - - 16,938 16,938
Other comprehensive loss - - - - - (30,537) (2,606) (33,143)
------------------------- ---- -------- -------- -------- ----------- -------- ------------ -------- --------
Total comprehensive
(loss)/income
for the year - - - - - (30,537) 14,332 (16,205)
Transactions with owners
Shares issued 14 - 328 - - - - - 328
Options exercised
relating
to previous business
combination - - - - (15,763) - 15,763 -
Share-based payments - - - - 4,558 - 1,956 6,514
------------------------- ---- -------- -------- -------- ----------- -------- ------------ -------- --------
30 September 2023 12 236,231 238,385 5 23,485 36,203 (4,361) 529,960
------------------------- ---- -------- -------- -------- ----------- -------- ------------ -------- --------
Consolidated Statement of Cash Flows
for the year ended 30 September 2023
Year Year
ended ended
30 September 30 September
2023 2022
Note GBP000 GBP000
--------------------------------------------------- ---- ------------- -------------
Cash flows from operating activities
Profit before tax 7,146 9,279
Adjustments for:
Amortisation of acquired intangible assets 10 26,595 26,591
Amortisation of internally generated software 10 3,827 4,118
Depreciation of property, plant and equipment 330 280
Depreciation of right of use assets 896 920
Share-based payment expense 7,028 5,226
Finance income 6 (181) (2,127)
Finance costs 6 15,611 9,665
--------------------------------------------------- ---- ------------- -------------
Operating cash flows before movements in working
capital 61,252 53,952
(Increase)/decrease in trade and other receivables (3,259) 304
Decrease in trade and other payables (289) (4,847)
--------------------------------------------------- ---- ------------- -------------
Cash generated by operations 57,704 49,409
Income taxes paid (8,143) (9,981)
--------------------------------------------------- ---- ------------- -------------
Net cash from operating activities 49,561 39,428
--------------------------------------------------- ---- ------------- -------------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 9 (24,932) (358,763)
Additions to internally generated software 10 (8,727) (4,209)
Payment for property, plant and equipment (411) (270)
Payment for right of use assets (188) -
Interest income received 181 -
Payment of contingent consideration - (20,946)
--------------------------------------------------- ---- ------------- -------------
Net cash used in investing activities (34,077) (384,188)
--------------------------------------------------- ---- ------------- -------------
Cash flows from financing activities
Payment of contingent consideration - (1,222)
Repayment of loans and borrowings 12 (69,110) (359)
Proceeds from loans and borrowings 12 21,250 -
Payment of interest on lease liabilities (189) (137)
Payment of lease liabilities (794) (959)
Shares issued 14 328 -
Interest paid 12 (10,651) (7,283)
--------------------------------------------------- ---- ------------- -------------
Net cash used in financing activities (59,166) (9,960)
--------------------------------------------------- ---- ------------- -------------
Cash and cash equivalents at the beginning of the
year 51,817 397,451
Net decrease in cash and cash equivalents (43,682) (354,720)
Effect of foreign exchange rate changes 404 9,086
--------------------------------------------------- ---- ------------- -------------
Cash and cash equivalents at the end of the year 11 8,539 51,817
--------------------------------------------------- ---- ------------- -------------
Notes to the Consolidated Financial Statements
1. Accounting policies
General information
Auction Technology Group plc (the "Company") is a company
incorporated in the United Kingdom under the Companies Act. The
Company is a public company limited by shares and is registered in
England and Wales.
Basis of preparation
The Consolidated Financial Statements consolidate those of the
Company and its subsidiaries (together referred to as the "Group").
The parent Company accounts present information about the entity
and not about its Group.
The Consolidated Financial Statements have been prepared and
approved by the Directors in accordance with UK-adopted
International Accounting Standards ("UK-adopted IAS") and with the
requirements of the Companies Act 2006.
The Consolidated Financial Statements have been prepared under
the historical cost convention, except for certain financial
instruments which have been measured at fair value. All accounting
policies set out below have been applied consistently to all
periods presented in these Consolidated Financial Statements.
The information for the year ended 30 September 2022 does not
constitute statutory accounts for the purposes of Section 435 of
the Companies Act 2006. A copy of the accounts for the Company for
the year ended 30 September 2022 has been delivered to the
Registrar of Companies. The auditor's report on those accounts was
not qualified and did not contain statements under Section 498(2)
or 498(3) of the Companies Act 2006. The accounts for the year
ended 30 September 2023 have been audited and finalised on the
basis of the financial information presented by the Directors in
this Preliminary Statement and will be delivered to the Registrar
of Companies following the Annual General Meeting.
New and amended accounting standards effective during the
year
The following amended standards and interpretations were
effective during the year:
-- Amendments to IAS 16: Property, Plant and Equipment: proceeds
before intended use
-- IAS 37: Onerous Contracts: costs of fulfilling a contract
-- Annual Improvements to IFRS Standards 2018-2020
-- Amendments to IFRS 3: Business Combinations: reference to
conceptual framework
The adoption of the standards and interpretations has not led to
any changes to the Group's accounting policies or had any other
material impact on the financial position or performance of the
Group.
New standards, interpretations and amendments issued but not yet
effective
The following new accounting standards, amendments and
interpretations to accounting standards have been issued but these
are not mandatory for 30 September 2023 and they have not been
adopted early by the Group:
-- IFRS 17: Insurance Contracts
-- Amendments to IAS 1: Classification of liabilities as current
and non-current
-- Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure
of accounting policies
-- Amendments to IAS 8: Definition of accounting estimates
-- Amendments to IAS 12: Deferred Tax related to assets and
liabilities arising from a single transaction
The Directors anticipate that the adoption of planned standards
and interpretations in future periods will not have a material
impact on the Consolidated Financial Statements of the Group.
Going concern
The Directors are required to assess going concern at each
reporting period. The Directors have undertaken the going concern
assessment for the Group for a minimum of 12 months from the date
of signing these financial statements. The Directors have assessed
the Group's prospects, both as a going concern and its longer-term
viability. After considering the current financial projections, the
bank facilities available and then applying severe but plausible
sensitivities, the Directors of the Company are satisfied that the
Group has sufficient resources for its operational needs and will
remain in compliance with the financial covenants in its bank
facilities for at least the next 12 months from the date of
approving these Consolidated Financial Statements. The process and
key judgements in coming to this conclusion are set out below:
Liquidity
The Group entered into the Senior Facilities Agreement on 17
June 2021 which included the Senior Term Facility for $204.0m for
the acquisition of LiveAuctioneers. The Senior Term Facility was
drawn down in full on 30 September 2021 prior to completion of the
acquisition of LiveAuctioneers on 1 October 2021. During the year
ended 30 September 2023, a prepayment of $53.7m (GBP48.0m) was paid
on the Senior Term Facility. In the absence of any other
prepayments, the next scheduled repayment would be $7.4m on 30 June
2024. The loan will be due for repayment on 17 June 2026. At 30
September 2023 the loan was subject to interest at a margin of
3.00% over US SOFR. In addition, the Group has a multi-currency
revolving credit working capital facility (the "RCF") for $49.0m.
Any sums outstanding under the RCF will be due for repayment on 17
June 2026. On 1 February 2023, $26.3m (GBP21.3m) was drawn down to
partly fund the acquisition of ESN (see note 9), which has been
repaid in full as at 30 September 2023. As at 30 September 2023 the
Group has adjusted net debt of GBP115.7m and is in a net current
liability position.
Covenants
The Group is subject to covenant tests on the Senior Term
Facility, with the most sensitive covenant being the net leverage
ratio covenant adjusted net debt: trailing 12-month adjusted
EBITDA. The net leverage ratio covenant was a maximum of 4.0x,
which reduced to 3.5x in Q2 FY23, was 3.0x at 30 September 2023 and
will reduce to 2.75x in Q4 FY24. Under the base case forecasts and
each of the downside scenarios, including the combined downside
scenario, the Group is forecast to be in compliance with the
covenants and have cash headroom, without applying mitigating
actions which could be implemented such as reducing capital
expenditure spend. At 30 September 2023, the net leverage ratio was
1.8x compared to the limit of 3.0x and therefore the Group was
comfortably within the covenant.
Scenario planning
The Directors have undertaken the going concern assessment for
the Group, taking into consideration the Group's business model,
strategy, and principal and emerging risks. As part of the going
concern review the Directors have reviewed the Group's forecasts
and projections, assessed the headroom on the Group's facilities
and the banking covenants. This has been considered under a base
case and several plausible but severe downside scenarios, taking
into consideration the Group's principal risks and uncertainties.
These scenarios include significant reduction in commission revenue
due to THV reduction, significant reduction in commission revenue
due to online share decline and lower revenue growth from
value-added services across the Group. None of these scenarios
individually or collectively threaten the Group's ability to
continue as a going concern. Even in the combined downside scenario
modelled (the combination of all downside scenarios occurring at
once) the Group would be able to operate within the level of its
current available debt facilities and covenants. Accordingly, the
Directors continue to adopt the going concern basis in preparing
the Consolidated Financial Statements for the year ended 30
September 2023.
Climate change
The Group has assessed the impacts of climate change on the
Group's Consolidated Financial Statements, including our commitment
to achieving Net zero by 2040 and the actions the Group intends to
take to achieve those targets. The assessment did not identify any
material impact on the Group's significant judgements or estimates
at 30 September 2023, or the assessment of going concern and the
Group's viability over the next three years.
Specifically, we have considered the following areas:
-- the physical and transition risks associated with climate
change; and
-- the actions the Group is taking to meet its carbon reduction
and Net zero targets.
As a result, the Group has assessed the potential impacts of
climate change on the Consolidated Financial Statements, and in
particular on the following areas:
-- the impact on the Group's future cash flows, and the
resulting impact such adjustments to the future cash flows would
have on the outcome of the annual impairment testing of goodwill
balances (see note 10), the recognition of deferred tax assets and
our assessment of going concern;
-- the carrying value of the Group's assets, in particular the
recoverable amounts of intangible assets and property, plant and
equipment; and
-- changes to estimates of the useful economic lives of
intangible assets and property, plant and equipment.
2. Significant judgements and key sources of estimation uncertainty
The preparation of the Group's Consolidated Financial Statements
requires the use of certain judgements, estimates and assumptions
that affect the reported amounts of assets, liabilities, income and
expenses.
Estimates and judgements are evaluated continually, and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
Key estimation uncertainties are the key assumptions concerning
the future and other key sources of estimation uncertainty at the
reporting date that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next period. Changes in accounting estimates
may be necessary if there are changes in the circumstances on which
the estimates were based, or as a result of new information or more
experience.
Significant judgements are those that the Group has made in the
process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the
financial statements.
The significant judgements and key sources of estimation
uncertainty disclosed in the annual financial statements for the
year ended 30 September 2022 which are no longer applicable
are:
-- impairment of goodwill (estimate); and
-- LiveAuctioneers consideration (judgement).
For the year ended 30 September 2023, there are no key sources
of estimation uncertainty and the significant judgements are
detailed below:
Goodwill and other intangible assets arising from business
combinations
The purchase price of an acquired company is allocated between
intangible assets and the net tangible assets of the acquired
business with the residual amount of the purchase price recorded as
goodwill. The determination of the value of the intangible assets
requires significant judgements and estimates to be made by
management. These judgements can include, but are not limited to,
the cash flows that an asset is expected to generate in the future
and the appropriate weighted average cost of capital. Of the
intangibles acquired, the customer relationship balances are
especially sensitive to changes in assumptions around discount
rates and customer attrition rates (see note 9).
Judgement is also required in determining appropriate useful
economic lives ("UEL") of the intangible assets arising from
business combinations. Management makes this judgement on an asset
class basis and has determined that contracts with customers have a
UEL of two to 14 years; brands have a UEL of five to 15 years;
software has a UEL of three to 10 years; and non-compete agreements
have a UEL of four years.
Functional currency of subsidiaries
There is an element of judgement required when assessing the
functional currency of each subsidiary against the requirements and
guidance of IAS21 "The Effects of Changes in Foreign Exchange
Rates", in particular for intermediate holding companies. There
were seven US holding companies within the Group that have a pound
sterling functional currency. However, under US
tax rules, their tax functional currency is US dollars. The US
tax basis for these holding companies for the year ending 30
September 2023 included an unrealised foreign exchange loss of
GBP28.2m (FY22: gain of GBP61.9m) on intra-group loans totalling
GBP295.6m (FY22: loans of GBP295.6m). Under US tax rules, foreign
exchange gains and losses are not taxable until they are realised.
On a consolidated basis, with the pound sterling functional
currency applied for these US holding companies there was no
foreign exchange gain recognised in the Consolidated Financial
Statements.
3. Alternative performance measures
The Group uses a number of alternative performance measures
("APMs") in addition to those measures reported in accordance with
UK-adopted IAS. Such APMs are not defined terms under UK-adopted
IAS and are not intended to be a substitute for any UK-adopted IAS
measure. The Directors believe that the APMs are important when
assessing the ongoing financial and operating performance of the
Group and do not consider them to be more important than, or
superior to, their equivalent UK-adopted IAS. The APMs improve the
comparability of information between reporting periods by adjusting
for factors such as one-off items and the timing of
acquisitions.
The APMs are used internally in the management of the Group's
business performance, budgeting and forecasting, and for
determining Executive Directors' remuneration and that of other
management throughout the business. The APMs are also presented
externally to meet investors' requirements for further clarity and
transparency of the Group's financial performance. Where items of
income or expense are being excluded in an APM, these are included
elsewhere in our reported financial information as they represent
actual income or costs of the Group.
Other commentary within the CFO's Review, should be referred to
in order to fully appreciate all the factors that affect the
Group.
Adjusted EBITDA
Adjusted EBITDA is the measure used by the Directors to assess
the trading performance of the Group's businesses and is the
measure of segment profit.
Adjusted EBITDA represents profit/(loss) before taxation,
finance costs, depreciation and amortisation, share-based payment
expense and exceptional operating items. Adjusted EBITDA at segment
level is consistently defined but excludes central administration
costs including Directors' salaries.
The following table provides a reconciliation from profit before
tax to adjusted EBITDA:
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
------------------------------------------------------- ------------- -------------
Profit before tax 7,146 9,279
Adjustments for:
Net finance costs (note 6) 15,430 7,538
Amortisation of acquired intangible assets (note 10) 26,595 26,591
Amortisation of internally generated software (note
10) 3,827 4,118
Depreciation of property, plant and equipment 330 280
Depreciation of right of use assets 896 920
Share-based payment expense 7,028 5,226
Exceptional operating items 2,712 -
------------------------------------------------------- ------------- -------------
Adjusted EBITDA 63,964 53,952
------------------------------------------------------- ------------- -------------
The following table provides the calculation of adjusted EBITDA
margin which represents adjusted EBITDA divided by revenue:
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
---------------------------- ------------- -------------
Reported revenue (note 4,5) 135,225 119,846
Adjusted EBITDA 63,964 53,952
Adjusted EBITDA margin 47% 45%
---------------------------- ------------- -------------
The basis for treating these items as adjusting is as
follows:
Share-based payment expense
The Group has issued share awards to employees and Directors: at
the time of IPO; for the acquisition of LiveAuctioneers; and
operates several employee share schemes. The share-based payment
expense is a significant non-cash charge driven by a valuation
model which references the Group's share price. As the Group is
still early in its life cycle as a newly listed business the
expense is distortive in the short term and is not representative
of the cash performance of the business. In addition, as the
share-based payment expense includes significant charges related to
the IPO and LiveAuctioneers acquisition, it is not representative
of the Group's steady state operational performance.
Exceptional operating items
The Group applies judgement in identifying significant items of
income and expenditure that are disclosed separately from other
administrative expenses as exceptional where, in the judgement of
the Directors, they need to be disclosed separately by virtue of
their nature or size in order to obtain a clear and consistent
presentation of the Group's ongoing business performance. Such
items could include, but may not be limited to, costs associated
with business combinations, gains and losses on the disposal of
businesses, significant reorganisation or restructuring costs and
impairment of goodwill and acquired intangible assets. Any item
classified as an exceptional item will be significant and not
attributable to ongoing operations and will be subject to specific
quantitative and qualitative thresholds set by and approved by the
Directors prior to being classified as exceptional.
The exceptional operating items are detailed below:
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
---------------------------------- ------------- -------------
Acquisition costs 2,712 -
---------------------------------- ------------- -------------
Total exceptional operating items 2,712 -
---------------------------------- ------------- -------------
For the year ended 30 September 2023, the Group's exceptional
operating costs were in respect of the costs relating to the
acquisition of ESN on 6 February 2023 (see note 9).
There were no exceptional operating items for the year ended 30
September 2022.
The business has undertaken focused acquisitive activity which
has been strategically implemented to increase income, service
range and critical mass of the Group. Acquisition costs comprise
legal, professional, other consultancy expenditure incurred and
retention bonuses for ESN employees payable one year after
completion. The retention bonus is subject to service conditions
and is being accrued over the period. The net cash outflow related
to exceptional operating items in the period is GBP1.5m (FY22:
GBP4.0m).
Adjusted earnings and adjusted diluted earnings per share
Adjusted earnings excludes share-based payment expense,
exceptional items (operating and finance), amortisation of acquired
intangible assets, and any related tax effects.
The following table provides a reconciliation from profit/(loss)
after tax to adjusted earnings:
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
---------------------------------------------------------- ------------- -------------
Profit/(loss) attributable to equity shareholders of
the Company 16,938 (6,127)
Adjustments for:
Amortisation of acquired intangible assets 26,595 26,591
Exceptional finance items 4,271 (221)
Share-based payment expense 7,028 5,226
Exceptional operating items 2,712 -
Deferred tax on unrealised foreign exchange differences (7,185) 15,899
Tax on adjusted items (10,272) (5,254)
---------------------------------------------------------- ------------- -------------
Adjusted earnings 40,087 36,114
---------------------------------------------------------- ------------- -------------
Number Number
--------------------------------------------------- ----------- -----------
Diluted weighted average number of shares in issue
(note 8) 123,088,377 122,441,916
p p
--------------------------------------------------- ----------- -----------
Adjusted diluted earnings per share (pence) 32.6 29.5
--------------------------------------------------- ----------- -----------
The basis for treating these items not already defined above as
adjusting is as follows:
Amortisation of acquired intangible assets through business
combinations
The amortisation of acquired intangibles arises from the
purchase consideration of a number of separate acquisitions. These
acquisitions are portfolio investment decisions that took place at
different times and are items in the Consolidated Statement of
Financial Position that relate to M&A activity rather than the
trading performance of the business.
Exceptional finance items
Exceptional finance items include foreign exchange differences
arising on the revaluation of the foreign currency loans,
intercompany and restricted cash, movements in contingent
consideration and costs incurred on the early repayment of loan
costs. These exceptional finance items are excluded from adjusted
earnings to provide readers with helpful additional information on
the performance of the business across periods because it is
consistent with how the business performance is reported and
assessed by the Board.
Deferred tax on unrealised foreign exchange differences
In calculating the adjusted tax rate, the Group excludes the
potential future impact of the deferred tax effects on unrealised
foreign exchange differences arising on intercompany loans. The
unrealised foreign exchange differences were not recognised in the
Group's profit for the year due to differences in the functional
currency basis under tax and accounting rules for the US holding
entities.
Tax on adjusted items
Tax on adjusted items includes the tax effect of acquired
intangible amortisation, exceptional (operating and finance items)
and share-based payment expense. In calculating the adjusted tax
rate, the Group excludes the potential future impact of the
deferred tax effects on deductible goodwill and intangible
amortisation (other than internally generated software), as the
Group prefers to give users of its accounts a view of the tax
charge based on the current status of such items. Deferred tax
would only crystallise on a sale of the relevant businesses, which
is not anticipated at the current time, and such a sale, being an
exceptional item, would result in an exceptional tax impact.
Organic revenue
The Group has made certain acquisitions that have affected the
comparability of the Group's results. Previously the Group had
reported proforma revenue and proforma revenue growth which
included acquisitions as if they had occurred at the start of the
comparative period, with the comparative period being presented on
a constant currency basis using the current year exchange rates. It
was deemed by management more appropriate to present organic
revenue and organic revenue growth in FY23 given the size of the
ESN acquisition. Organic revenue shows the current period results
excluding the acquisition of ESN on 6 February 2023. Organic
revenue is shown on a constant currency basis using average
exchange rates for the current financial period applied to the
comparative period and is used to eliminate the effects of
fluctuations in assessing performance. Refer to the Glossary for
the full definition.
The following table provides a reconciliation of organic revenue
from reported results:
Unaudited Unaudited
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
------------------------------- ------------- -------------
Reported revenue 135,225 119,846
Acquisition related adjustment (5,682) -
Constant currency adjustment - 3,193
------------------------------- ------------- -------------
Organic revenue 129,543 123,039
------------------------------- ------------- -------------
Increase in organic revenue % 5%
------------------------------- ------------- -------------
Adjusted net debt
Adjusted net debt comprises external borrowings net of
arrangement fees and cash at bank which allows management to
monitor the indebtedness of the Group. Adjusted net debt excludes
lease liabilities and restricted cash (see note 11).
In the prior year, cash at bank included cash held by the
Trustee of the Group's Employee Benefit Trust, which is not
available to circulate within the Group on demand. This has been
included in restricted cash and results in a restatement for the
year ended 30 September 2022. This change in policy provides users
with more reliable information about the nature of the Group's cash
and cash equivalents.
Restated
30 September 30 September
2023 2022
GBP000 GBP000
------------------------------------------- ------------ -------------
Cash at bank (note 11) 6,097 49,427
Current loans and borrowings (note 12) (12,861) (30,983)
Non-current loans and borrowings (note 12) (108,969) (149,862)
------------------------------------------- ------------ -------------
Total loans and borrowings (121,830) (180,845)
------------------------------------------- ------------ -------------
Adjusted net debt (115,733) (131,418)
------------------------------------------- ------------ -------------
Adjusted free cash flow and adjusted free cash flow
conversion
Adjusted free cash flow represents cash flow from operations
less additions to internally generated software and property, plant
and equipment. Internally generated software includes development
costs in relation to software that are capitalised when the related
projects meet the recognition criteria under UK-adopted IAS for an
internally generated intangible asset. Movement in working capital
is adjusted for balances relating to exceptional items. The Group
monitors its operational efficiency with reference to operational
cash conversion, defined as free cash flow as a percentage of
adjusted EBITDA.
The Group uses adjusted cash flow measures for the same purpose
as adjusted profit measures, in order to assist readers of the
accounts in understanding the operational performance of the Group.
The two measures used are free cash flow and free cash flow
conversion. A reported free cash flow and cash conversion rate has
not been provided as it would not give a fair indication of the
Group's free cash flow and conversion performance given the high
value of working capital from exceptional items.
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
------------------------------------------------------- ------------- -------------
Adjusted EBITDA 63,964 53,952
------------------------------------------------------- ------------- -------------
Cash generated by operations 57,704 49,409
Adjustments for:
Exceptional operating items 2,712 -
Working capital from exceptional and other items (1,187) 4,983
Additions to internally generated software (note 10) (8,727) (4,209)
Additions to property, plant and equipment (411) (270)
Payment for right of use assets (188) -
------------------------------------------------------- ------------- -------------
Adjusted free cash flow 49,903 49,913
------------------------------------------------------- ------------- -------------
Adjusted free cash flow conversion (%) 78% 93%
------------------------------------------------------- ------------- -------------
4. Operating segments
The operating segments reflect the Group's management and
internal reporting structure, which is used to assess both the
performance of the business and to allocate resources within the
Group. The assessment of performance and allocation of resources is
focused on the category of customer for each type of activity.
The Board has determined an operating management structure
aligned around the four core operations of the Group. ESN which was
acquired in the period, has been allocated to the Art &
Antiques segment. This is on the basis that ESN traditionally
includes items sold on Art & Antique platforms and the purpose
of the acquisition was to expand its Art & Antiques segment
into an attractive adjacent channel for the resale of second-hand
items.
The four operating segments are as follows:
-- Art & Antiques ("A&A") marketplaces: focused on
offering auction houses that specialise in the sale of arts and
antiques access to the platforms thesaleroom.com,
liveauctioneers.com, lot-tissimo.com and EstateSales.NET. A
significant part of the Group's services is provision of a platform
as a marketplace for the A&A auction houses to sell their
goods. The segment also generates earnings through additional
services such as listing subscriptions, marketing income, atgPay
and atgShip. The Group contracts with customers predominantly under
service agreements, where the number of auctions to be held and the
service offering differs from client to client.
-- Industrial & Commercial ("I&C") marketplaces: focused
on offering auction houses that specialise in the sale of
industrial and commercial goods and machinery access to the
platforms BidSpotter.com, BidSpotter.co.uk and proxibid.com, as
well as i-bidder.com for consumer surplus and retail returns. A
significant part of the Group's services is provision of the
platform as a marketplace for the I&C auction houses to sell
their goods. The segment also generates earnings through additional
services such as marketing income and atgPay. The Group contracts
with customers predominantly under service agreements, where the
number of auctions to be held and the service offering differs from
client to client.
-- Auction Services: includes revenues from the Group's auction
house back-office products with Auction Mobility and other white
label products including Wavebid.com.
-- Content: focused on the Antiques Trade Gazette paper and
online magazine. The business focuses on two streams of income:
selling subscriptions of the Gazette and selling advertising space
within the paper and online. The Directors have disclosed
information required by IFRS 8 for the Content segment despite the
segment not meeting the reporting threshold.
There are no undisclosed or other operating segments.
An analysis of the results for the year by reportable segment is
as follows:
Year ended 30 September 2023
------------------------------------------- -----------------------------------------------------------
Centrally
Auction allocated
A&A I&C Services Content costs Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- -------- ------- --------- ------- ---------- --------
Revenue 65,624 58,223 8,300 3,078 - 135,225
Adjusted EBITDA (see note 3 for definition
and reconciliation) 53,941 49,897 5,216 1,116 (46,206) 63,964
Amortisation of intangible assets
(note 10) (19,853) (9,158) (1,411) - - (30,422)
Depreciation of property, plant and
equipment (112) (197) (8) (13) - (330)
Depreciation of right of use assets (554) (279) (8) (55) - (896)
Share-based payment expense (1,491) (1,764) (84) - (3,689) (7,028)
Exceptional operating items (note
3) (2,712) - - - - (2,712)
Operating profit/(loss) 29,219 38,499 3,705 1,048 (49,895) 22,576
Net finance costs (note 6) - - - - (15,430) (15,430)
Profit/(loss) before tax 29,219 38,499 3,705 1,048 (65,325) 7,146
------------------------------------------- -------- ------- --------- ------- ---------- --------
Year ended 30 September 2022
------------------------------------------- ------------------------------------------------------------
Centrally
Auction allocated
A&A I&C Services Content costs Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- -------- -------- --------- ------- ---------- --------
Revenue 55,279 52,775 8,636 3,156 - 119,846
Adjusted EBITDA (see note 3 for definition
and reconciliation) 45,777 45,629 6,090 1,089 (44,633) 53,952
Amortisation of intangible assets
(note 10) (18,504) (10,931) (1,274) - - (30,709)
Depreciation of property, plant and
equipment (87) (176) (6) (11) - (280)
Depreciation of right of use assets (475) (381) (13) (51) - (920)
Share-based payment expense (1,848) (893) (3) - (2,482) (5,226)
Operating profit/(loss) 24,863 33,248 4,794 1,027 (47,115) 16,817
Net finance costs (note 6) - - - - (7,538) (7,538)
Profit/(loss) before tax 24,863 33,248 4,794 1,027 (54,653) 9,279
------------------------------------------- -------- -------- --------- ------- ---------- --------
Segment assets are measured in the same way as in the financial
statements. These assets are allocated based on the operations of
the segment and the physical location of the asset.
30 September 2023 30 September 2022
--------------------- ----------------------------- -----------------------------
Total Additions Total Additions
non-current to non-current non-current to non-current
assets assets assets assets
GBP000 GBP000 GBP000 GBP000
--------------------- ------------ --------------- ------------ ---------------
By operating segment
A&A 483,977 38,188 506,484 395,683
I&C 187,313 5,986 199,504 58,829
Auction Services 27,939 350 31,704 201
Content 276 256 91 15
--------------------- ------------ --------------- ------------ ---------------
699,505 44,780 737,783 454,728
--------------------- ------------ --------------- ------------ ---------------
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
------------------------- ------------- -------------
By geographical location
United Kingdom 57,960 65,954
USA 637,489 667,696
Germany 4,056 4,133
------------------------- ------------- -------------
699,505 737,783
------------------------- ------------- -------------
The Group has taken advantage of paragraph 23 of IFRS 8
"Operating Segments" and does not provide segmental analysis of net
assets as this information is not used by the Directors in
operational decision-making or monitoring of business
performance.
5. Revenue
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
----------------------------------------- ------------- -------------
Product and customer types
A&A 65,624 55,279
I&C 58,223 52,775
Auction Services 8,300 8,636
Content 3,078 3,156
----------------------------------------- ------------- -------------
135,225 119,846
----------------------------------------- ------------- -------------
Primary geographical markets
by location of operations
United Kingdom 19,654 18,539
USA 111,637 97,765
Germany 3,934 3,542
----------------------------------------- ------------- -------------
135,225 119,846
----------------------------------------- ------------- -------------
by location of customer
United Kingdom 20,029 18,571
USA 102,138 89,055
Europe 7,049 6,648
Rest of world 6,009 5,572
----------------------------------------- ------------- -------------
135,225 119,846
----------------------------------------- ------------- -------------
Timing of transfer of goods and services
Point in time 122,559 110,539
Over time 12,666 9,307
----------------------------------------- ------------- -------------
135,225 119,846
----------------------------------------- ------------- -------------
The Group has recognised the following assets and liabilities
related to contracts with customers:
30 September 30 September 1 October
2023 2022 2021
GBP000 GBP000 GBP000
--------------------- ------------ ------------ ---------
Contract assets 1,486 837 597
--------------------- ------------ ------------ ---------
Contract liabilities 1,518 1,783 1,367
--------------------- ------------ ------------ ---------
The following table shows how much of the revenue recognised in
the current reporting period relates to carried-forward contract
liabilities:
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
----------------------------------------------------- ------------- -------------
Revenue recognised that was included in the contract
liabilities balance at the beginning of the year 1,452 1,258
----------------------------------------------------- ------------- -------------
6. Net finance costs
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
-------------------------------------- ------------- -------------
Foreign exchange gain - 2,070
Interest income 181 57
-------------------------------------- ------------- -------------
Finance income 181 2,127
-------------------------------------- ------------- -------------
Interest on loans and borrowings (10,572) (7,214)
Amortisation of finance costs (499) (465)
Foreign exchange loss (4,061) -
Movements in contingent consideration (211) (1,849)
Interest on lease liabilities (189) (137)
Interest on tax (79) -
-------------------------------------- ------------- -------------
Finance costs (15,611) (9,665)
-------------------------------------- ------------- -------------
Net finance costs (15,430) (7,538)
-------------------------------------- ------------- -------------
7. Taxation
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
-------------------------------------- ------------- -------------
Current tax
Current tax on profit for the year 9,379 11,395
Adjustments in respect of prior years (167) (903)
-------------------------------------- ------------- -------------
Total current tax 9,212 10,492
-------------------------------------- ------------- -------------
Deferred tax
Current year (18,198) 6,328
Adjustments from change in tax rates (505) (564)
Adjustments in respect of prior years (301) (850)
-------------------------------------- ------------- -------------
Deferred tax (19,004) 4,914
-------------------------------------- ------------- -------------
Tax (credit)/expense (9,792) 15,406
-------------------------------------- ------------- -------------
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the standard tax rate
applicable to profits of the Group as follows:
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
---------------------------------------------------------- ------------- -------------
Profit before tax 7,146 9,279
Tax at United Kingdom tax rate of 22% (FY22: 19%) 1,572 1,763
Tax effect of:
Additional items deductible for tax purposes (643) (1,649)
Differences in overseas tax rates 1 (1,317)
Deferred tax on unrealised foreign exchange differences (7,185) 15,899
Foreign exchange difference not (taxable)/deductible
for tax purposes (2,564) 3,027
Adjustments from change in tax rates (505) (564)
Adjustments in respect of prior years (468) (1,753)
---------------------------------------------------------- ------------- -------------
Tax (credit)/expense (9,792) 15,406
---------------------------------------------------------- ------------- -------------
The deferred tax credit on unrealised foreign exchange
differences of GBP7.2m (FY22: charge of GBP15.9m) arises from US
holding companies which have pound sterling as their functional
currency for the Consolidated Financial Statements but US dollar
functional currency under US tax rules. Per the US tax basis these
holding companies incurred an unrealised foreign exchange loss of
GBP28.2m on intra-group loans denominated in pound sterling
totalling GBP295.6m (FY22: gain of GBP61.9m). Unrealised foreign
exchange differences are not taxable until realised, giving rise to
deferred tax.
The Group's profit before tax includes foreign exchange gain of
GBP10.1m from US holding companies on their US dollar denominated
intra-group balances (FY22: loss of GBP15.9m) which are not
(taxable)/deductible for US tax purposes giving rise to a permanent
difference of GBP2.6m (FY22: GBP3.0m).
The Group's tax affairs are governed by local tax regulations in
the UK, US and Germany. Given the uncertainties that could arise in
the application of these regulations, judgements are often required
in determining the tax that is due. Where management is aware of
potential uncertainties in local jurisdictions, that are judged
more likely than not to result in a liability for additional tax, a
provision is made for management's best estimate of the liability,
determined with reference to similar transactions and third-party
advice. This provision at 30 September 2023 amounted to GBP0.8m
(FY22: GBP1.1m).
Adjustments from changes in tax rates are due to decreases in
the blended US rate for state taxes apportionment. The UK
Government announced an increase in the corporation tax rate from
19% to 25%, with an effective date of 1 April 2023, which was
substantively enacted on 24 May 2021.
Tax recognised in other comprehensive income and equity:
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
--------------------------- ------------- -------------
Other comprehensive income
Current tax (2,606) 3,074
Equity
Deferred tax - (150)
--------------------------- ------------- -------------
Tax recognised in other comprehensive income includes current
tax on the Group's net investment hedge. Deferred tax directly
recognised in equity relates to share-based payments.
8. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the
profit/(loss) for the year attributable to ordinary shareholders by
the weighted average number of ordinary shares outstanding during
the year, after excluding the weighted average number of non-vested
ordinary shares.
Diluted earnings/(loss) per share is calculated by dividing the
profit/(loss) for the year attributable to ordinary shareholders by
the weighted average number of ordinary shares including
non-vested/non-exercised ordinary shares. During the year and prior
year, the Group awarded conditional share awards to Directors and
certain employees through an LTIP. For FY22, the
non-vested/non-exercised ordinary shares are anti-dilutive given
the loss for the year and are therefore excluded from the weighted
average number of ordinary shares for the purpose of diluted
earnings per share calculation.
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
----------------------------------------------------- ------------- -------------
Profit/(loss) attributable to equity shareholders of
the Company 16,938 (6,127)
----------------------------------------------------- ------------- -------------
Number Number
-------------------------------------------------------- ----------- -----------
Weighted average number of shares in issue 121,050,307 120,364,831
Weighted average number of options vested not exercised 1,338,182 -
Weighted average number of shares held by the Employee
Benefit Trust (162,934) (61,741)
-------------------------------------------------------- ----------- -----------
Weighted average number of shares 122,225,555 120,303,090
Dilutive share options 862,822 2,138,826
-------------------------------------------------------- ----------- -----------
Diluted weighted average number of shares 123,088,377 122,441,916
p p
-------------------------------------------------------- ----------- -----------
Basic earnings/(loss) per share 13.9 (5.1)
Diluted earnings/(loss) per share 13.8 (5.1)
-------------------------------------------------------- ----------- -----------
9. Business combinations
Business combinations for the year ended 30 September 2023
Acquisition of Vintage Software LLC., trading as EstateSales.NET
("ESN")
On 6 February 2023, the Group acquired 100% of the equity share
capital of ESN. ESN provides a platform to facilitate estate sales
across the US. Both corporate estate sale companies as well as
private customers use ESN to advertise online the sale of millions
of unique second-hand items sourced from a range of events
including private home estate sales and business liquidations. The
purpose of the acquisition was to further strengthen the Group's
presence in the US and expand its A&A segment into an
attractive adjacent channel for the resale of second-hand
items.
The maximum consideration payable is $40.0m (GBP33.1m), with an
initial cash payment of $30.2m (GBP25.1m), deferred consideration
of $10.0m (GBP8.3m) payable after 12 months and a working capital
adjustment of $27,000 (GBP22,000).
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
(GBP8.0m). Exchange differences to reserves were recorded within
foreign exchange differences on translation of foreign operations
in the Consolidated Statement of Comprehensive Income or Loss. The
unwinding of discount of GBP0.3m will be reported as a finance cost
in the Consolidated Statement of Profit or Loss over the period of
the earn-out.
Provisional purchase price allocation
Management assessed the fair value of the acquired assets and
liabilities as part of the purchase price allocation ("PPA"). This
has been prepared on a provisional basis and the fair values of the
assets and liabilities is as set out below.
Fair value Provisional
Book value adjustments fair value
GBP000 GBP000 GBP000
---------------------------------------------------- ---------- ------------ -----------
Acquired intangible assets - software - 2,161 2,161
Acquired intangible assets - customer relationships - 9,559 9,559
Acquired intangible assets - brand 229 2,406 2,635
Property, plant and equipment 161 - 161
Right of use assets 438 - 438
Cash and cash equivalents 155 - 155
Trade receivables and other receivables 41 - 41
Lease liabilities (438) - (438)
Trade and other payables (264) - (264)
---------------------------------------------------- ---------- ------------ -----------
Net assets on acquisition 322 14,126 14,448
Goodwill (note 10) 18,609
---------------------------------------------------- ---------- ------------ -----------
Total consideration 33,057
---------------------------------------------------- ---------- ------------ -----------
Consideration satisfied by:
Initial cash consideration 25,087
Deferred consideration 7,970
---------------------------------------------------- ---------- ------------ -----------
33,057
---------------------------------------------------- ---------- ------------ -----------
Net cash flow arising on acquisition:
Initial cash consideration 25,087
Less: cash and cash equivalent balances acquired (155)
---------------------------------------------------- ---------- ------------ -----------
24,932
---------------------------------------------------- ---------- ------------ -----------
Acquired intangible assets
Acquired intangible assets represent customer relationships,
auction technology platform and brand for which amortisation of
GBP1.4m has been charged for the year ended 30 September 2023. The
intangible assets will be amortised over their respective expected
useful economic lives: customer relationships of two to seven
years, auction technology platform of five years and brand of 15
years. A 1% change in the customer attrition rate results in a
GBP0.5m change in the valuation.
Deferred tax
Goodwill and acquired intangible assets of GBP33.0m are expected
to be deductible for income tax purposes.
Goodwill
Goodwill arises as a result of the surplus of consideration over
the fair value of the separately identifiable assets acquired. The
main reason leading to the recognition of goodwill is the future
economic benefits arising from assets which are not capable of
being individually identified and separately recognised; these
include the value of synergies expected to be realised
post-acquisition, new customer relationships and the fair value of
the assembled workforce within the business acquired.
Acquisition costs of GBP2.7m directly related to the business
combination have been immediately expensed to the Consolidated
Statement of Profit or Loss as part of administrative expenses and
included within exceptional operating items (see note 3). Between 6
February 2023 and 30 September 2023, ESN contributed GBP5.7m to
Group revenues and a profit before tax of GBP1.1m. If the
acquisition had occurred on 1 October 2022, Group revenue would
have been GBP137.4m and Group profit before tax would have been
GBP8.2m.
10. Goodwill and other intangible assets
Total
acquired Internally
Customer Non-compete intangible generated
Software relationships Brand agreement assets software Goodwill Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
Cost
1 October 2021 11,945 59,817 11,426 1,236 84,424 11,485 141,160 237,069
Acquisition of
business 24,494 120,023 21,457 - 165,974 1,820 281,341 449,135
Additions - - - - - 4,209 - 4,209
Exchange differences 5,953 27,966 5,493 260 39,672 2,118 66,477 108,267
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
30 September 2022 42,392 207,806 38,376 1,496 290,070 19,632 488,978 798,680
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
Acquisition of
business (note
9) 2,161 9,559 2,635 - 14,355 - 18,609 32,964
Additions - - - - - 8,727 - 8,727
Exchange differences (3,040) (14,019) (2,764) (126) (19,949) (1,448) (33,272) (54,669)
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
30 September 2023 41,513 203,346 38,247 1,370 284,476 26,911 474,315 785,702
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
Amortisation and
impairment
1 October 2021 5,376 12,947 1,880 297 20,500 7,332 - 27,832
Amortisation 6,118 17,436 2,736 301 26,591 4,118 - 30,709
Exchange differences 924 2,023 477 106 3,530 1,156 - 4,686
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
30 September 2022 12,418 32,406 5,093 704 50,621 12,606 - 63,227
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
Amortisation 4,610 18,727 2,917 341 26,595 3,827 - 30,422
Exchange differences (527) (1,303) (276) (59) (2,165) (1,209) - (3,374)
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
30 September 2023 16,501 49,830 7,734 986 75,051 15,224 - 90,275
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
Net book value
1 October 2021 6,569 46,870 9,546 939 63,924 4,153 141,160 209,237
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
30 September 2022 29,974 175,400 33,283 792 239,449 7,026 488,978 735,453
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
30 September 2023 25,012 153,516 30,513 384 209,425 11,687 474,315 695,427
--------------------- -------- -------------- ------- ----------- ----------- ---------- -------- --------
Included within internally generated software is capital
work-in-progress of GBP3.5m (FY22: GBP2.8m).
Intangible assets, other than goodwill, have a finite life and
are amortised over their expected useful lives.
The expected amortisation profile of acquired intangible assets
is shown below:
Customer Non-compete
Software relationships Brand agreement Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------ -------- -------------- ------- ----------- -------
One to five years 17,070 83,262 14,873 384 115,589
Six to 10 years 7,942 50,879 10,224 - 69,045
11 to 15 years - 19,375 5,416 - 24,791
--------------------- -------- -------------- ------- ----------- -------
30 September 2023 25,012 153,516 30,513 384 209,425
--------------------- -------- -------------- ------- ----------- -------
10. Goodwill and other intangible assets continued
Impairment assessment
The goodwill and intangibles attributed to each of the Group's
cash-generating units ("CGUs") and groups of CGUs are assessed for
impairment at least annually or more frequently where there are
indicators of impairment. The Group tests for impairment of
goodwill at the operating segment level representing an aggregation
of CGUs, the level at which goodwill is monitored by management. No
CGU or group of CGUs is larger than an operating segment as defined
by IFRS 8 "Operating Segments" before aggregation. The recoverable
amount for CGU groups has been determined on a value in use basis
("VIU").
The table below sets out the carrying values of goodwill and
other acquired intangible assets allocated to each CGU at 30
September 2023 along with the pre-tax discount rates applied to the
risk-adjusted cash flow forecasts and the long-term growth
rate.
Acquired
intangible Long-term Pre-tax
Goodwill assets Valuation growth discount
2023 GBP000 GBP000 method rate rate
----------------- -------- ----------- --------- --------- ---------
A&A marketplaces 299,196 177,091 VIU 3% 12.7%
I&C marketplaces 154,900 25,057 VIU 3% 12.7%
Auction Services 20,219 7,277 VIU 3% 11.4%
----------------- -------- ----------- --------- --------- ---------
Total 474,315 209,425
----------------- -------- ----------- --------- --------- ---------
Acquired
intangible Long-term Pre-tax
Goodwill assets Valuation growth discount
2022 GBP000 GBP000 method rate rate
----------------- -------- ----------- --------- --------- ---------
A&A marketplaces 304,282 196,672 VIU 3% 13.4%
I&C marketplaces 162,615 33,420 VIU 3% 13.4%
Auction Services 22,081 9,357 VIU 3% 12.1%
----------------- -------- ----------- --------- --------- ---------
Total 488,978 239,449
----------------- -------- ----------- --------- --------- ---------
When testing for impairment, recoverable amounts for all the
Group's CGUs and groups of CGUs are measured at their value in use
by discounting the future expected cash flows from the assets in
the CGUs. These calculations use cash flow projections based on
Board approved budgets and approved plans. While the Group prepares
a five-year plan, levels of uncertainty increase as the planning
horizon extends. The Group's plan focuses more closely on the next
three years, however for the purposes of the impairment testing the
five-year forecasts are used as we do not anticipate the long-term
growth rate to be achieved until after this time.
The key assumptions and estimates used for value in use
calculations are summarised as follows:
Assumption Approach
---------------- --------------------------------------------------------------------
Risk-adjusted are determined by reference to the budget for the year following
cash flows the balance sheet date and forecasts for the following four
years, after which a long-term perpetuity growth rate is applied.
The most recent financial budget approved by the Board has
been prepared after considering the current economic environment
in each of the Group's markets. These projections represent
the Directors' best estimate of the future performance of these
businesses.
---------------- --------------------------------------------------------------------
CAGR is the five-year compound annual growth rate from FY23 of the
risk-adjusted cash flows above.
---------------- --------------------------------------------------------------------
Long-term are applied after the forecast period. These are based on external
growth rates reports on long-term GDP growth rates for the main markets
in which each CGU operates. Therefore, these do not exceed
the long-term average growth rates for the individual markets.
---------------- --------------------------------------------------------------------
Pre-tax discount are derived from the post-tax weighted average cost of capital
rates ("WACC") which has been calculated using the capital asset
pricing model. They are weighted based on the geographical
area in which the CGU group's revenue is generated. The assumptions
used in the calculation of the WACC are benchmarked to externally
available data and they represent the Group's current market
assessment of the time value of money and risks specific to
the CGUs. Movements in the pre-tax discount rates for CGUs
since the year ended 30 September 2022 are driven by changes
in market-based inputs. Any unsystematic risk on the CGUs has
been inherently built into the cash flows of each of the CGUs
and therefore no additional element of risk has been included
in the discount rates used at 30 September 2023.
---------------- --------------------------------------------------------------------
Sensitivity analysis
At 30 September 2023 under the impairment assessments prepared
there is no impairment required. However, both the A&A
marketplaces and Auction Services CGUs are sensitive to a movement
in any one of the key assumptions. Management have therefore
performed sensitivity analysis based on reasonably possible
scenarios including increasing the discount rates and reducing the
CAGR on the future forecast cash flows, both of which are feasible
given the current future uncertainty of macroeconomics. For the
I&C marketplaces CGU, there is no realistic change of
assumption that would cause the CGU's carrying amount to exceed its
recoverable amount.
For the A&A marketplaces CGU, under the base case there is
headroom of GBP248.8m at 30 September 2023 (FY22: GBP28.0m). The
year-on-year increase in headroom is due a number of factors but
predominantly arises from the inclusion of ESN in the CGU, reduced
discount rate, one year's amortisation and improved cash flows in
the terminal year.
For the recoverable amount to fall to the carrying value, the
discount rate would need to be increased to 17.4% from 12.7% (FY22:
13.9% from 13.4%), the long-term growth rate reduced to a negative
4.5% from 3.0% (FY22: 2.2% from 3.0%), or the CAGR from FY23 on the
five-year future forecast cash flows reduced by nine ppt (FY22: one
ppt). With an uncertain macroeconomic outlook, it is difficult to
model the precise impact on business performance at this time but
should there be an economic downturn the A&A segment is likely
to be impacted in the short term due to reduced sales and margins
but it would then be expected to return to higher growth in later
years. Management has modelled a scenario where A&A CGU revenue
declines 4% in both FY24 and FY25, resulting in a cumulative
decrease of 8% with a return to steeper growth from FY26 to FY28.
The overall impact on the five-year adjusted EBITDA CAGR is a
reduction of 3%. A potential increase of 1% in discount rate or a
reasonable worst-case increase of 2% in the discount rate and 3%
reduction in five-year CAGR growth rate could reduce the headroom
to GBP90.0m and GBP39.0m respectively (FY22: impairment of GBP59.0m
and GBP96.0m).
For Auction Services with a headroom of GBP6.1m (FY22: GBP1.7m)
for the recoverable amount to fall to the carrying value, the
discount rate would need to be increased to 13.4% from 11.4% (FY22:
12.6% from 12.1%), the long-term growth rate reduced to 0.2% from
3.0% (FY22: 2.3% from 3.0%), or the CAGR on the five-year adjusted
EBITDA cash flows reduced by two ppt (FY22: three ppt). Auction
Services is particularly sensitive to the long-term growth rate and
discount rate applied. An increase of 1% in the discount rate and
1% reduction in the long-term growth rate could reduce headroom to
GBP0.7m (FY22: impairment of GBP3.6m).
11. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
restricted cash. The carrying amount of these assets approximates
to their fair value.
Restated
30 September 30 September
2023 2022
GBP000 GBP000
---------------- ------------ -------------
Cash at bank 6,097 49,427
Restricted cash 2,442 2,390
---------------- ------------ -------------
8,539 51,817
---------------- ------------ -------------
Restricted cash consists of cash held by the Trustee of the
Group's Employee Benefit Trust relating to share awards for
employees.
In the prior year cash at bank included cash held by the Trustee
of the Group's Employee Benefit Trust. As these funds are not
available to circulate within the Group on demand, it is deemed
more appropriate this should be classified as restricted cash. The
prior year has been restated accordingly. This change in policy
provides users with more reliable information about the nature of
the Group's cash and cash equivalents.
12. Loans and borrowings
The carrying amount of loans and borrowings classified as
financial liabilities at amortised cost approximates to their fair
value.
30 September 30 September
2023 2022
GBP000 GBP000
------------------ ------------ ------------
Current
Secured bank loan 12,861 30,983
Non-current
Secured bank loan 108,969 149,862
------------------ ------------ ------------
121,830 180,845
------------------ ------------ ------------
The Group entered into a Senior Facilities Agreement on 17 June
2021 which included:
-- A senior term loan facility (the "Senior Term Facility") for
$204.0m for the acquisition of LiveAuctioneers. The Senior Term
Facility was drawn down in full on 30 September 2021 prior to
completion of the acquisition of LiveAuctioneers on 1 October 2021.
During the year ended 30 September 2023, a prepayment of $53.7m
(GBP48.0m) was paid on the Senior Term Facility. In the absence of
any other prepayments, the scheduled repayment in FY23 is $7.4m on
30 June 2024 and $8.7m on 30 September 2024. The loan will be due
for repayment on 17 June 2026.
-- A multi-currency revolving credit working capital facility
(the "Revolving Credit Facility") for $49.0m. Any sums outstanding
under the Revolving Credit Facility will be due for repayment on 17
June 2026. On 1 February 2023, $26.3m (GBP21.3m) was drawn down to
partly fund the acquisition of ESN (see note 9), and has been fully
repaid by 30 September 2023.
-- The Senior Facilities Agreement contains an adjusted net
leverage covenant which tests the ratio of adjusted net debt
against adjusted EBITDA and an interest cover ratio which tests the
ratio of adjusted EBITDA against net finance charges, in each case
as at the last date of each financial quarter, commencing with the
financial quarter ending 30 September 2021. The Group has complied
with the financial covenants of its borrowing facilities during the
year ended 30 September 2023.
The movements in loans and borrowings are as follows:
30 September 30 September
2023 2022
GBP000 GBP000
--------------------------------------------------- ------------ ------------
1 October 180,845 149,039
Repayment of loans and borrowings (69,110) (359)
Proceeds from loans and borrowings 21,250 -
Accrued interest and amortisation of finance costs 11,071 7,679
Interest paid (10,651) (7,283)
Exchange differences (11,575) 31,769
--------------------------------------------------- ------------ ------------
30 September 121,830 180,845
--------------------------------------------------- ------------ ------------
The currency profile of the loans and borrowings is as
follows:
30 September 30 September
2023 2022
GBP000 GBP000
---------- ------------ ------------
US dollar 121,830 180,845
---------- ------------ ------------
The weighted average interest charge (including amortised cost
written off) for the year is as follows:
Year ended Year ended
30 September 30 September
2023 2022
% %
------------------ ------------- -------------
Secured bank loan 8% 4%
------------------ ------------- -------------
13. Deferred taxation
The movement of net deferred tax liabilities is as follows:
Capitalised Other
goodwill Share-based Foreign Research temporary
and intangibles Tax losses payments exchange and development differences Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ---------------- ---------- ----------- --------- ---------------- ------------ --------
1 October 2021 (12,229) 1,370 19 1,563 - 383 (8,894)
Acquisition of
business
(note 9) (43,514) 548 276 511 - 27 (42,152)
Amount
credited/(charged)
to Consolidated
Statement
of Profit or Loss 6,327 3,526 1,002 (15,509) - (260) (4,914)
Amount charged to
equity - - (150) - - - (150)
Exchange differences (8,869) 673 (13) (308) - 9 (8,508)
---------------------- ---------------- ---------- ----------- --------- ---------------- ------------ --------
30 September 2022 (58,285) 6,117 1,134 (13,743) - 159 (64,618)
---------------------- ---------------- ---------- ----------- --------- ---------------- ------------ --------
Deferred tax asset - - - - - - -
Deferred tax
liabilities (58,285) 6,117 1,134 (13,743) - 159 (64,618)
---------------------- ---------------- ---------- ----------- --------- ---------------- ------------ --------
1 October 2022 (58,285) 6,117 1,134 (13,743) - 159 (64,618)
Amount credited to
Consolidated
Statement of Profit
or Loss 5,922 3,766 674 7,268 1,548 (174) 19,004
Exchange differences 4,163 (475) - 1,172 9 56 4,925
---------------------- ---------------- ---------- ----------- --------- ---------------- ------------ --------
30 September 2023 (48,200) 9,408 1,808 (5,303) 1,557 41 (40,689)
---------------------- ---------------- ---------- ----------- --------- ---------------- ------------ --------
Deferred tax asset - - - - - - -
Deferred tax
liabilities (48,200) 9,408 1,808 (5,303) 1,557 41 (40,689)
---------------------- ---------------- ---------- ----------- --------- ---------------- ------------ --------
Tax losses include unrelieved interest in the US, where there
are sufficient taxable profits forecast to be available in the
future to enable them to be utilised. These losses are available
indefinitely. Tax on foreign exchange include unrealised foreign
exchange differences arises from US holding companies with pound
sterling as their functional currency for the Consolidated
Financial Statements but US dollar functional currency under US tax
rules (see note 7). A deferred tax asset of GBP1.6m (2022 nil)
relates to the US research and development credit which is spread
over future years rather than fully deductible in the year it
arises.
No deferred tax asset has been recognised in respect of unused
tax losses in the UK of GBP0.7m (FY22: GBP0.7m) as it is not
considered probable that there will be future taxable profits
available to offset these tax losses. The losses may be carried
forward indefinitely. The temporary differences relating to the
unremitted earnings of overseas subsidiaries amounted to GBP0.9m
(FY22: GBP1.1m). However, as the Group can control whether it pays
dividends from its subsidiaries and it can control the timing of
any dividends, no deferred tax has been provided on the unremitted
earnings on the basis there is no intention to repatriate these
amounts.
In presenting the Group's deferred tax balances, the Group
offsets assets and liabilities to the extent we have a legally
enforceable right to set off the arising income tax liabilities and
assets when those deferred tax balances reverse.
14. Share capital and reserves
30 September 30 September
2023 2022
GBP000 GBP000
------------------------------------------------------------- ------------ ------------
Authorised, called up and fully paid
121,491,412 ordinary shares at 0.01p each (FY22: 120,525,304
ordinary shares at 0.01p each) 12 12
------------------------------------------------------------- ------------ ------------
12 12
------------------------------------------------------------- ------------ ------------
The movements in share capital, share premium and other reserve
are set out below:
Number of Share capital Share premium Other reserve
shares GBP000 GBP000 GBP000
---------------------------------------- ----------- ------------- ------------- -------------
1 October 2021 119,999,990 12 235,903 238,385
Shares issued 506,926 - - -
Shares issued in respect of share-based
payment plans 18,388 - - -
---------------------------------------- ----------- ------------- ------------- -------------
30 September 2022 120,525,304 12 235,903 238,385
---------------------------------------- ----------- ------------- ------------- -------------
Shares issued 680,794 - 328 -
Shares issued in respect of share-based
payment plans 285,314 - - -
---------------------------------------- ----------- ------------- ------------- -------------
30 September 2023 121,491,412 12 236,231 238,385
---------------------------------------- ----------- ------------- ------------- -------------
For the year ended 30 September 2023
966,108 ordinary shares of 0.01p each with an aggregate nominal
value of GBP97 were issued for options that vested for a cash
consideration of GBP328,000. These included management rollover
options and restricted stock units granted in FY22 for the
acquisition of LiveAuctioneers, Long-term Incentive Plan Awards
("LTIP Awards"), shares issued under the Share Incentive Plan
("SIP") and Employee Stock Purchase Plan ("ESPP") and to the Trust
for LTIP Awards that have vested in the year.
For the year ended 30 September 2022
525,314 ordinary shares of 0.01p each with an aggregate nominal
value of GBP53 were issued for options that vested. These included
50% of the restricted stock units granted for the LiveAuctioneers
acquisition, LTIP Awards, shares issued under the SIP and ESPP and
to the Trust for LTIP Awards that have vested in the year.
Reserves
The following describes the nature and purpose of each reserve
within equity:
Retained losses represent the profits/(losses) of the Group made in current
and preceding years.
------------------ ----------------------------------------------------------------
Other reserve comprises:
* a merger reserve that arose on the Group
reorganisation on 13 January 2020 and is the
adjustment of the comparative and current year
consolidated reserves of the Group to reflect the
statutory share capital and share premium of Auction
Technology Group plc as if it had always existed; and
* share premium, net of share issue costs, recognised
in the other reserve in accordance with section 612
of the Companies Act 2006 for the equity raise on 17
June 2021 via a cashbox placing.
------------------ ----------------------------------------------------------------
Capital redemption arose on the redemption or purchase of the Company's own shares.
reserve The Company issued shares directly to the Trusts of 266,322
during the year and held 210,475 as at 30 September 2023 (FY22:
124,927).
------------------ ----------------------------------------------------------------
Share option relates to share options awarded under the LTIP Awards and
reserve options granted in FY22 for the acquisition of LiveAuctioneers.
------------------ ----------------------------------------------------------------
Foreign exchange comprises all foreign exchange differences arising from the
reserve translation of the financial statements of foreign operations.
------------------ ----------------------------------------------------------------
15. Related party transactions
For the year ended 30 September 2023
The Group paid seven months' rent of $80,000 (GBP64,000) to
McQuade Enterprises LLC, a company owned by the previous owners of
ESN. There were other no related party transactions.
For the year ended 30 September 2022
There were no related party transactions.
Key management personnel compensation
The Group has determined that the key management personnel
constitute the Board and the members of the Senior Management
Team.
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
-------------------------------------------- ------------- -------------
Short-term employee benefits 3,182 4,600
Post-employment benefits 61 73
Share-based payment expense 3,908 3,062
-------------------------------------------- ------------- -------------
Total key management personnel compensation 7,151 7,735
-------------------------------------------- ------------- -------------
Remuneration of Directors
The total amounts for Directors' remuneration were as
follows:
Restated1
Year ended Year ended
30 September 30 September
2023 2022
GBP000 GBP000
------------------------------ ------------- -------------
Short-term employee benefits 1,034 1,354
Non-Executive Directors' fees 334 284
Post-employment benefits 48 46
Share-based payment expense 1,624 1,152
------------------------------ ------------- -------------
Total Directors' remuneration 3,040 3,142
------------------------------ ------------- -------------
1 Short-term benefits restated to include annual bonuses.
16. Events after the balance sheet date
There were no other events after the balance sheet date.
Glossary
A&A Art & Antiques
---------------- ----------------------------------------------------------------
atgPay the Group's integrated payment solution
---------------- ----------------------------------------------------------------
atgShip the Group's integrated shipping solution
---------------- ----------------------------------------------------------------
Auction Mobility Auction Mobility LLC
---------------- ----------------------------------------------------------------
Bidder sessions web sessions on the Group's marketplaces online within
a given timeframe
---------------- ----------------------------------------------------------------
BidSpotter the Group's marketplace operated via the www.BidSpotter.co.uk
and www.BidSpotter.com domain
---------------- ----------------------------------------------------------------
Big 4 Christie's, Sotheby's, Phillips and Bonhams A&A auction
houses
---------------- ----------------------------------------------------------------
EBITDA earnings before interest, taxes, depreciation and amortisation
---------------- ----------------------------------------------------------------
ESN the Group's marketplace operated via the www.EstateSales.NET
domain
---------------- ----------------------------------------------------------------
GMV gross merchandise value, representing the total final
sale value of all lots sold via winning bids placed
on the marketplaces or the platform, excluding additional
fees (such as online fees and auctioneers' commissions)
and sales of retail jewellery (being new, or nearly
new, jewellery)
---------------- ----------------------------------------------------------------
i-bidder the Group's marketplace operated by the www.i-bidder.com
domain
---------------- ----------------------------------------------------------------
I&C Industrial & Commercial
---------------- ----------------------------------------------------------------
LiveAuctioneers the Group's marketplace operated via the www.liveauctioneers.com
domain
---------------- ----------------------------------------------------------------
Lot-tissimo the Group's marketplace operated via the www.lot-tissimo.com
domain
---------------- ----------------------------------------------------------------
LTIP Awards the Company's Long-term Incentive Plan
---------------- ----------------------------------------------------------------
Marketplaces the online auction marketplaces operated by the Group
---------------- ----------------------------------------------------------------
Conversion rate represents GMV as a percentage of THV; previously called
'online share'
---------------- ----------------------------------------------------------------
Organic revenue Organic revenue shows the current period results excluding
the acquisition of ESN on 6 February 2023. Organic
revenue is shown on a constant currency basis using
average exchange rates for the current financial period
applied to the comparative period and is used to eliminate
the effects of fluctuations in assessing performance.
---------------- ----------------------------------------------------------------
Proxibid the Group's marketplace operated via the www.proxibid.com
domain
---------------- ----------------------------------------------------------------
The Saleroom the Group's marketplace operated via the www.the-saleroom.com
domain
---------------- ----------------------------------------------------------------
Take rate represents the Group's marketplace revenue, excluding
EstateSales.NET, as a percentage of GMV. Marketplace
revenue is the Group's reported revenue excluding Content
and Auction Services revenue
---------------- ----------------------------------------------------------------
THV total hammer value, representing the total final sale
value of all lots listed on the marketplaces or the
platform, excluding additional fees (such as online
fees and auctioneers' commissions) and sales of retail
jewellery (being new, or nearly new, jewellery)
---------------- ----------------------------------------------------------------
Timed auctions auctions which are held entirely online (with no in-room
or telephone bidders) and where lots are only made
available to online bidders for a specific, pre-determined
timeframe
---------------- ----------------------------------------------------------------
Timed+ the Group's integrated bidding solution for timed auctions
on LiveAuctioneers and Auction Mobility
---------------- ----------------------------------------------------------------
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END
FR UKRRRORUAUUA
(END) Dow Jones Newswires
November 30, 2023 02:00 ET (07:00 GMT)
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