FTSE 250 movers: Essentra lifted by deal news; Auction Tech hammered
By Frank Prenesti
Date: Thursday 01 Dec 2022
(Sharecast News) - FTSE 250: 19,381.19, up 1.14% at 1330 GMT.
omponents maker Essentra gained after saying it had bought Wixroyd Group, a UK supplier of industrial parts for the engineering sector, for an initial £29.5m with a further £7m potentially payable on a deferred earn-out basis.
The deal is the first acquisition to be announced since Essentra outlined its new strategy as a pure-play components business. Essentra said Wixroyd Group expands its capabilities in hardware components and creates "significant" additional cross-selling opportunities across a range of current end markets with the initial focus on its customer base in Continental Europe.
Essentra said it expected the acquisition to be accretive to adjusted earnings in the first full year of ownership, with return on invested capital forecast to exceed 15% within three years, and deliver profit margins significantly ahead of the current group level.
Based in Chichester, the Wixroyd Group comprises three UK brands of differentiated mechanical components supplying 9,000 customers. For the year ended December 31, 2021, Wixroyd generated revenue of £10.4m, and EBITDA of £2.6m.
The initial purchase price and any subsequent conditional consideration will be financed from Essentra's existing cash flow and debt facilities.
Marketplace operator Auction Technology Group fell, despite reporting full-year revenue of £119.8m on Thursday, up 11% on a pro forma basis after "resilient" growth in gross merchandise value, with an additional boost from its value-add services.
The FTSE 250 company said revenue was 71% higher year-on-year on a reported basis for the 12 months ended 30 September, including contribution from LiveAuctioneers, and a foreign exchange benefit due to its high proportion of dollar revenue.
Adjusted EBITDA rose 70% to £54m, as the adjusted EBITDA margin was flat year-on-year as expected at 45%, as high operational leverage offset "significant" planned investments in the talent and infrastructure necessary for Auction Technology to achieve its scale ambitions, as well as the full-year impact of public company costs.
The firm swung to a profit before tax of £9.3m, compared to a loss of £25m a year earlier, which the board said was largely driven by the increase in revenue and the one-off impact of costs relating to the initial public offering and acquisitions last year.
Basic losses per share narrowed to 5.1p from 31p, with the increase in profit before tax offset by deferred tax charges, while adjusted diluted earnings per share rocketed 221% to 29.5p.
Auction Technology said its "strong" cash generation was driven by a capital-light model, with £49.9m of adjusted free cash flow compared to £30.4m last year, and 92.5% adjusted free cash conversion.
Closing adjusted net debt totalled £129m, swinging from net cash of £24.6m a year earlier, impacted by foreign exchange movements on its dollar loan.
Looking ahead, Auction Technology said trading in the first two months of the 2023 financial year had been "broadly in line" with its second-half 2022 performance.
The board said it was confident of a continued strong performance in the new period, while also factoring in an uncertain macroeconomic environment.
For the 2023 period, the firm said it expected high-single digit to low-double digit constant currency revenue growth, with a higher rate of growth in the second half amid the further roll-out and take-up of value-add services.
It was anticipating making continued investment to support growth, including in its single technology platform, which was expected to deliver £2m in operational cost savings per annum from the 2025 financial year onwards.
As a result of the investments, for the 2023 period it said it expected its adjusted EBITDA margin to be broadly flat.
As at the end of the 2022 period, more than 80% of the company's revenue was now in dollars.
For a 10% change in the sterling-to-dollar exchange rate, Auction Technology said it would expect an 8% change in revenue.
"ATG has delivered another strong year of financial and operational performance, in line with the increased guidance that we provided at our half-year results," said chief executive officer John-Paul Savant.
"Our success demonstrates the resilience of the ATG model, both as the structural shift online of the auction industry has continued, and as our business has become increasingly diversified by vertical and by revenue stream.
"We have made strong progress against our strategic growth drivers, including the roll out of value-add services which drives both revenue for auctioneers and improves the experience for bidders, whilst simultaneously providing another layer of growth for ATG."
John-Savant said the acquisition and integration of LiveAuctioneers further demonstrated the firm's "strong track record" in value-enhancing mergers and acquisitions.
"Even as we are facing high levels of macroeconomic uncertainty, we are confident about the future.
Auction Technology was in a "unique position" to transform the auction industry, Savant said.
"Our shared success model will ensure our auctioneer partners grow alongside us, and most importantly, as ATG grows the online auction channel, we will also accelerate the growth of the circular economy."
At 0830 GMT, shares in Auction Technology Group were down 5.72% at 808p.
FTSE 250 - Risers
Bridgepoint Group (Reg S) (BPT) 214.40p 9.11%
Molten Ventures (GROW) 424.00p 8.72%
ASOS (ASC) 672.50p 6.49%
Future (FUTR) 1,487.00p 5.84%
Babcock International Group (BAB) 296.60p 4.51%
Essentra (ESNT) 255.00p 4.51%
Diploma (DPLM) 2,924.00p 4.43%
Drax Group (DRX) 634.00p 4.36%
Ascential (ASCL) 225.20p 4.36%
Man Group (EMG) 218.10p 4.35%
FTSE 250 - Fallers
Auction Technology Group (ATG) 758.00p -11.55%
Investec (INVP) 488.90p -5.65%
Quilter (QLT) 96.44p -4.89%
Ninety One (N91) 192.00p -4.57%
Currys (CURY) 74.50p -4.18%
Home Reit (HOME) 48.85p -3.46%
Bellway (BWY) 1,952.50p -2.67%
Petrofac Ltd. (PFC) 81.75p -2.56%
CLS Holdings (CLI) 158.80p -1.98%
Hammerson (HMSO) 23.65p -1.79%
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