Auction Technology Group plc

Welcome and thank you for joining HEG's interim results for fiscal year 25. I will be covering some highlights to start out, then our director of IR, Becky Edelman, will cover the financials, and then I'll conclude looking at some of the strategic things that we've been working on and our outlook. We're also joined today by Sarah Highfield, who's our new CFO, but as this is literally day one for her, she'll be more in observation mode for today. So if you want to go to the highlights page, please. So I'm going to go through the highlights, but first at an overarching level, a few things to call out. So first of all, our key top line numbers are up when companies that we benchmark ourselves against have actually been down. So while 3.4% is not a phenomenal top line number, you look at that and you compare on our ANA side where we were up 5% and that compares to Etsy being down 9%. Or you look at our INC group where we're up 5% and Ritchie Brothers was down six to 7%. And so relative to the market, we feel very good about where we've been performing. The other thing, to call out is that the measures we use to judge our competitiveness are also up. So whether it be Excel adoption and the impact that we're having for our customers or shipping, ATG ship, and again, the impact that we're having for our customers there. And then finally, at an overarching level, I think what we feel very good about in the current environment is that we executed against everything we said that we would do back in November. And that really gives us confidence for the ambition that we have still for ATG and what we're trying to execute going forward. So clearly this is a tough time to be making strong predictions, but based on how we performed to date, based on how we've executed and how we've set ourselves up, we feel good about the execution that we've done. And we think that we've set ourselves up for a solid second half of fiscal year 25. So with that, just quickly looking at some of these metrics. So what did we do? We stabilized GMV, GMV up 1%, which is in line with our expectations for the year. We were able to both also expand our take rate by 0.1%, but that was driven off of very strong value-added services growth of 14%. And as I said, we executed against all our strategic initiatives, One of the big ones that people focus on right now is ATG Excel. And the thing that we're really pleased by is, again, more than 10% uplift to our customers when they run ATG Excel. And then that translates into incremental GMV for us. We've also executed on the AMP packages, the ATG Excel single upload and search and discovery, all of which I'll cover in more detail later. We're able to allocate our capital effectively. So we successfully refinanced our debt. and we launched our share buyback program. And then finally, we feel that we strengthened our team yet again, adding our new CFO who's joining now in May. We added a new CTO in April, and we'll talk more about their backgrounds. We also added two non-exec directors, one with deep technology experience and in two-sided marketplaces, and the other with deep finance experience and also in two-sided marketplaces. So for us, we feel like the first part of the year went to plan, and we feel good as we enter the second half of the year. So with that, I will turn it over to Becky for now, and then I will come back in a little bit.

Thank you, John-Paul, and good morning, everybody. So here's the headline financials. Revenue in the first half was 89 million. That's up 3.4% year over year. or 3.2% on a constant currency basis, with the small tailwinds reported results from the weakening of the dollar. EBITDA was 38.5 million, and that's up 8%, giving a margin of 43%, which is up one percentage point. Adjusted diluted EPS was 19 cents, which is up 14%, and we generated free cash flow of 32.5 million, that's an 84% conversion rate, and this results in adjusted net debt of 106.5 million at the end of the period, giving a leverage ratio of 1.3 times, which is down from 1.4 times at year end. So now to go into each of those in a bit more detail. So if we start off with revenue at the segmental level, headline here is that revenue growth was 3.4%, driven by robust 4% growth in marketplace revenue and offset as expected by auction services. As you can see from the table on the left-hand side, revenue includes 46.2 million from arts and antiques, which is up 4%. And this includes a full six months contribution from ESN in this period and the last, and therefore is like for life. With ESN continuing to perform well and contribute to A&A's growth alongside value-added services, which I'll touch on in a moment. Industrial and commercial revenue was 37 million. That's up 5% year on year. And this was driven by the expansion of the take rate as well as an improvement in GMV. So a continuation of the trend that we spoke about at FY24. Together, this gives 4% marketplace revenue growth. And John-Paul will touch on this later, but revenue growth was stronger in the first five months of FY25 with some deceleration of activity in March, but stabilization through April. Auction service revenue was 4 million, which was down 9%. And this was expected following our strategic decision last year to focus on our white label product, which is integrated with our marketplaces and away from smaller standalone white label customers. So there's an impact on revenue, but as we explained at the full year, the impact on the bottom line is relatively muted. And overall, this division performs slightly ahead of our updated expectations. In terms of our KPIs at the bottom of the page, I'll go through these in more detail when we talk through each of the segments. But as you may have seen from the RNS, we are transitioning to our KPIs to exclude real estate. And the reasons when we've discussed with you before, real estate auctions are lumpy and volatile, and they have a low take rate. And therefore they can significantly distort headline KPIs, making it much harder to understand what is happening in the vast majority of our business. However, in this slide, we've shown GMB and take rate with and without real estate, and there's a full reconciliation in the appendix. So GMV ex-real estate was 1.7 billion, up 1%, continuing the improvement from last year, whilst the take rate, also exceeding real estate, was 4.6%, up 0.1 percentage points, driven by growth in value-added services. So this slide shows a revenue bridge broken down by product area. And if you remember, our guidance was for VAS and value-added services to continue to be the key contributor to revenue growth. with a small contribution from commission and fixed fees. So in HY24, revenue was 86 million. Then in HY25, commission revenue increased 0.3 million, with a positive impact from higher GMV volumes, slightly offset by commission mix. So more lower commission rate items sold on average, but overall commission revenue up 1% year on year. Moving along, you can see the contribution from value-added services at 2.7 million, or adding three percentage points of growth. with revenue growth from each of the three product lines, shipping, marketing, and payments. These offset the drag from real estate, which is largely a fixed fee revenue business, which is, as I said already, is lumpy and hard to predict. But like the second half of last year, we did expect real estate to be somewhat of a drag in FY25. Next, you can see the increase in event and other fee revenue up 0.8 million. which is mainly driven by the number of auctions listed on our marketplaces, as well as subscription revenue at ESM. Then I've already touched on auction services. So overall you ended at the half with 89 million of revenue. Along the bottom as usual, we show the percentage point contribution to growth. So we grew 3.4% with value added services being the key driver as expected and a contribution from both commission and fixed fees. So moving on to ANA in a bit more detail, ANA performed well in what continues to be a difficult environment. And clearly the strong performer here is still the take rate of 9.8%, which increased 0.3 percentage points, driven by strong value-added services and in particular ATG ship, although ATG pay has continued to grow and marketing revenue has also grown in ANA. The challenging ANA environment is reflected in GMV, which was down 1%, although this is an improvement from the trend that we saw last year. Similar to what we spoke about before, there is a mixed impact for some of our headline KPIs. So whilst THV in ANA was up 3%, this was predominantly due to THV growth from both newer auctioneers and regions, all of which typically have lower conversion rates, resulting in our conversion rate being broadly flat in the half. The core ANA market then remains somewhat sluggish, although again, our ANA business is holding up much better than the broader market. Moving on to INC, which generated 37 million of revenue, up 5%. And in fact, if you were to exclude real estate, then INC is up 7%. Generally, there was a more stable market backdrop for most of the half, with THV up 3%, benefiting from a stabilisation of used asset prices and steady auction volumes in the half. The conversion rate was down slightly by less than one percentage points. But if you look by asset category, it remains a similar story to what we spoke about for the second half of last year. So whilst today we're not sharing all the detail by asset type, to give you some colour here, yellow iron or construction equipment continued to see strong growth in GMV and conversion rate improvement. It was also another strong half for grey iron or general industrial and commercial equipment, where the end market was strong and again, GMV grew very well. Green iron or agricultural equipment, THV, also grew at a strong rate. This is our largest THV category, but as a reminder, it tends to have a lower conversion rate than both grey iron, which is largely timed auctions, as well as yellow. So here is a negative mixed impact on conversion rates. Finally, as mentioned already, real estate was a drag to INC revenue. Similar to ANA, value-added services was strong for INC, and this is predominantly marketing revenue, which showed good growth across all INC marketplaces. So overall with VAS growth, we saw a 0.1 percentage point increase in the take rate to 2.9% to give overall 5% revenue growth for INC. Moving on to the next slide for profit and loss. I've already talked about our 3% revenue growth. Gross profit was flat with the gross profit margin down two percentage points as the growth of high margin marketing and commission revenue was offset by how amortization costs, which relate to higher capex spend in the last few years, as well as higher payroll costs. Admin expenses were down 9% and to break this down a little further, Share-based payments were 1.8 million lower than last year, partly related to changes in senior management and performance options. The bad debt charge was 1.2 million lower, with the charge last year largely related to our updated auction services strategy. And we had no operating exceptional cost in the half compared to 0.8 million last year. At the bottom of the table, you can see our adjusted EBITDA margin of 43%. which is in line with our expectations and our guidance for the full year of 45 to 46%, with some phasing of costs and also the revenue shape impacting the margin split between H1 and H2. Low admin expenses, you can see operating profits, that was up 43%, 15 million. And for net finance costs, the 6.1 million charge you can see here includes 1.4 million of exceptional costs related to our refinancing and FX. If you exclude these, net finance costs were down 2 million, benefiting from a lower debt balance as well as a lower average interest rate of 7%. The tax expense was 1.9 million, which includes a prior year tax credit adjustment. With our effective adjusted tax rate flat, higher EBITDA and lower net finance costs, you can see a 14% increase in EPS to 19 cents. Gave a view of two other strategic financial updates from the half. In February, we successfully refinanced our debt and entered a new 200 million RCF. In doing so, we extended the maturity of our debt and have now increased financial flexibility, with the RCF also priced at a lower rate than the old loan at a margin of 200 basis points over SOFR. Following the refi, we commenced a share repurchase program in March. And as a reminder for our capital allocation priorities, organic investment will always be a priority where it makes sense with the support of ROIs, particularly with regards to product and technology developments. For M&A, there is no change to our disciplined approach here. We're always on the lookout for very selective and, of course, accretive acquisitions. And we also have a 40 million discretionary share repurchase programme, and we've repurchased 1.5 million shares to date at an average price of 583p. Moving on to the final page to look at the movement of net debt. As you can see from the chart, we reduced leverage even as we continue to invest in the business as well as buying back shares. So we opened the year with 115 million of net debt, had adjusted EBITDA of 39 million and capex of six. So in line with our guidance for 12 to 13 million capex for the full year. The bulk of this capex has been focused on product and technology developments, including new features on our cross-listing product. Working capital movement was minimal and with cash interest of 7 million, which includes the cash costs of the refi and tax of 11 million with some timing impact here on cash tax payments. Overall on the refi and the balance sheet movement overall, there was 123 million repayment on the old facility. And we've so far drawn down 119.6 million on the new RCA, which includes having cash available for the share repurchase program. on which in the half we made a cash outlay of 7.6 million. Therefore, we ended with 106.5 million of net debt and leverage of 1.3 times, which as I already said, was a nudge down from 1.4 times at the start of the year. With that, I'm delighted to hand over and introduce our new CFO, Sarah Highfield, who has joined ATG today, who will say a few words. Over to you, Sarah.

Thanks, Becky. Lovely to meet you all. Good morning. I'm delighted to be joining such a fantastic business. I'm really excited about the opportunities that ATG has for the future. As John Paul said, this is day one for me, so you won't be hearing lots from me today. But I will look forward to meeting many of you over the coming weeks. And I will be getting stuck in very quickly into the business going forward. So thank you very much, and I'll hand over to John-Paul to take you through the strategic update.