MIDAS STOCK TIPS: Bidding for Auction Technology Group

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MIDAS ACTION TIPS: Sold! Make an Offer to Negotiate Auction Technology Group, a fast-growing, well-managed company at the forefront of its field

Early last month, Christie’s sold an Andy Warhol portrait of Marilyn Monroe for £155million. A week later, Sotheby’s shipped a Picasso for nearly £54million, while a jaw-dropping Monet left for £45million.

Mention auctions and these are the types of sales that most of us think of. But they are the exception. Around £150billion of goods are sold at auction each year, from second-hand sofas to combine harvesters and industrial cooking machines. Not so long ago, all these sales were made under the hammer of a room full of bidders.

Today, an increasing number of auctions are online and Auction Technology Group is an undisputed leader in the field. The company went public in February last year at £6. The price had spiked to over £16 in August and is now back down to £9.43. At this level, equities offer clear, long-term potential.

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Hitting the mark: Auction Technology Group traces its roots to 1971, when the trade magazine Antiques Trade Gazette was launched.

Auction Technology Group traces its origins to 1971 when the trade magazine Antiques Trade Gazette was launched. The publication exists to this day but, over the past 20 years, ATG has become a pioneer in online auctions, operating seven auction centers, from the Saleroom, specializing in art, antiques and collectibles in Europe, at BidSpotter, which sells industrial machinery, manufacturing equipment and food processing kit.

ATG runs between 60 and 100 auctions each week, selling 30 million items a year, worth over £2 billion. In each case, the auctions are organized by individual auction houses, from agricultural machinery specialists in the American Midwest to door-to-door sales in East Anglia. These auctioneers research and appraise the goods, but use ATG’s online marketplaces to conduct the auctions, some entirely via the internet and others a mix of physical and digital auctions.

The system helps buyers, sellers and auctioneers. ATG’s auction platforms are used by thousands of auction houses and are accessible from all over the world. This means that bidders can see a wider range of goods than ever before, while sellers are more likely to find willing buyers and get higher prices than they otherwise would.

The auction industry is conservative and online auctions still account for less than a third of global auctions. However, their appeal is growing and ATG Managing Director John Paul Savant is confident the trend will continue. Physical auctions may have a certain charm, but their digital equivalents are much more profitable for auctioneers and drive higher sales.

Concerns have been raised that Savant’s business will suffer if the economy tips into recession, but there are strong grounds for optimism. More than half of ATG’s revenue comes from industrial goods, and sales tend to increase when times are tough and businesses close or unload goods to generate cash.

Fewer high-end artworks are sold during economic downturns, but most ATG sales are under £5,000, mainly due to what are known in the trade as the four Ds – deaths , divorce, downsizing and debt. The group also owns i-bidder, where big companies such as Marks & Spencer and Dyson sell excess inventory in bulk – a business that should gain traction if times get tough.

Savant is also expected to advance the company by gaining market share, acquiring complementary businesses and opening up to new areas, such as shipping.

Brokers forecast a 65% increase in turnover to £116m for the year to September, with profits up 80% to £40m and further growth in 2023. company also offers its technology to other auction groups, creating an additional source of revenue.

Midas verdict: Auction Technology Group is a fast-growing, well-managed company at the forefront of its field. The shares, at £9.43, are a buy.

Traded on: main market Teleprinter: GTA Contact: auctiontechnologygroup.com or 020 3725 5500

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