Company Registered No: 12400807 (England and Wales)
AUCTION TOPCO LIMITED
ANNUAL REPORT AND FINANICAL STATEMENTS
FOR THE PERIOD FROM 13 JANUARY 2020 TO 30 SEPTEMBER 2020
AUCTION TOPCO LIMITED
COMPANY INFORMATION
Directors
T E Hargreaves
J Savant
Company Secretary
M Edwards
Registered number
12400807
Registered office
Registered auditor
The Harlequin Building
6th Floor
65 Southwark Street
London
SE1 0HR
Deloitte LLP
London
United Kingdom
AUCTION TOPCO LIMITED
Contents
Page
STRATEGIC REPORT .............................................................................................................................................. 1
DIRECTORS’ REPORT ............................................................................................................................................ 6
STATEMENT OF DIRECTORS’ RESPONSIBILITIES ............................................................................................. 9
INDEPENDENT AUDITOR’S REPORT .................................................................................................................. 10
CONSOLIDATED INCOME STATEMENT .............................................................................................................. 14
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION ..................................................... 15
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................................. 16
COMPANY STATEMENT OF CHANGES IN EQUITY ........................................................................................... 17
CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................ ..18
NOTES TO THE FINANCIAL STATEMENTS ......................................................................................................... 19
AUCTION TOPCO LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
The directors present the Annual Report and financial statements for the period from 13 January 2020 to 30 September
2020.
The directors, in preparing this report, have complied with s414C of the Companies Act 2006. This strategic report has
been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to
the Group and its subsidiary undertakings when viewed as a whole.
Review of business
Auction Topco Limited was incorporated on 13 January 2020. On 13 February 2020, Auction Topco Limited acquired
Turner Topco Limited and its subsidiaries and Proxibid Inc and its subsidiaries. The profit and loss figures included within
this report are from the incorporation to 30 September 2020.
Auction Topco Limited is an Investment holding company with investments in companies in the UK, USA and Germany.
The investments are funded by debt and equity.
Through its investments in subsidiaries the Group operates marketplaces and proprietary auction platforms for curated
online auctions, connecting bidders and auctioneers at scale. As a key partner and advocate for auctioneers, the Group
creates value by providing them with access to robust online marketplace capabilities, a global bidder base and a range
of value-added tools and services that enable them to maximise value on lots sold. The Group also helps auctioneers
achieve operational efficiencies and improves bidder experience on their behalf. The Group provides bidders with access
to a curated selection of unique and specialised secondary items in a trusted, simple, sustainable and convenient manner.
The Group’s goal is to provide the auction industry with the most cost-effective integrated suite of services including robust
online marketplace, impactful digital marketing, business intelligence and insight, efficient back-office software, and
customisable white label. For bidders the Group strives to provide a quality end-to-end buying experience that includes
access to and integration with the broader auction ecosystem, making purchases in the secondary market simpler and
more transparent. The Group primarily caters to auctioneers and bidders across the following three specific industry
verticals, with a focus on driving value for its users:
• Arts & Antiques (“A&A”), which includes watches, jewellery, furniture, fine art, decorative art, classic cars, collectables
and fashion.
•
Industrial & Commercial (“I&C”), which includes used equipment, commercial vehicles and machinery, for use across
a range of different industries including manufacturing (such as plastic, metal, wood, chemical, food and beverage,
and other manufacturing industries), laboratories and pharmaceuticals, warehousing, mining and utilities, oil and gas,
firearms, real estate, construction and agriculture.
• Consumer Surplus and Returns (“CS&R”), which includes surplus retail stock and items returned by consumers not
suitable for re-sale in-store, covering a range of retail goods including technology and electronics, homeware and
furniture.
The Group achieves this through its six leading curated digital Marketplaces in the United Kingdom, the United States and
Europe:
• Proxibid (proxibid.com) in the North American I&C market, which primarily focuses on ‘green iron’ and ‘yellow iron’
(agricultural and construction used equipment);
• BidSpotter US (BidSpotter.com) in the North American I&C market, which primarily focuses on ‘grey iron’
(manufacturing used equipment);
The Saleroom (the-saleroom.com) in the UK A&A market;
Lot-tissimo (lot-tissimo.com) with the EU A&A market;
i-bidder (i-bidder.com) in the UK CS&R market; and
•
•
•
• BidSpotter UK (BidSpotter.co.uk) in the UK I&C market, which is dedicated to insolvency auctioneers in the UK.
1
AUCTION TOPCO LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
The Group’s Marketplaces are operationally integrated, with the Group’s management team (based in London) overseeing
the Group’s shared operational infrastructure across its geographies. The Group’s marketplaces generally operate on its
proprietary global auction platforms.
Our businesses operate in dynamic growth sectors across multiple global industries. We hold significant market positions
in each of the geographies and markets we operate in. The Arts and Antiques ("A&A") industry reports £45 billion+ in sales
annually and the collection of Industrial and Commercial ("l&C") verticals that we serve is estimated by us to be in excess
of £100 billion. The auction markets for A&A and I&C are in the early stages of their digital evolution with less than 10% of
realised auction hammer values occurring online. We believe this trend will increase as more auctioneers and bidders
see the huge advantage online brings in terms of increased bidders and the resulting higher hammer values for the former,
and the greater access to wide ranging inventory for the latter.
Future Developments
The focus is on improving the marketplace; making it easier for auctioneers to hold events and easier for prospective
bidders to find items of interest and place a winning bid. During the period we've invested in both our technology and in
developing the bidder base, adding new features including enabling improved search and more. In the year ahead, we will
continue to focus on the user journey and marketing to continue to grow the number of bidders buying at auction.
Key performance indicators
The Group monitors various KPIs to track the financial and operating performance of its business, the key metrics used by
Management in determining performance are:
• Revenue
• Adjusted EBITDA
•
Free Cash Flow
Revenue
Revenue from auction, marketing and content related services are the measures used by the Directors to assess the ability
of each operating segment to generate cash inflows from the Group’s assets. The revenue is recognised in line with IFRS
15 Revenue from Contracts with customers as specified in note 1.10 of these financial statements.
Within the period ended 30 September 2020, £35,478,000 revenue was generated by the Group. An analysis by segment
and by geographical market can be found in note 4 of these statements.
Adjusted EBITDA
Adjusted EBITDA is the measure used by management to assess the trading performance of the Group’s businesses and
is the measure of segment profit that the Group presents under IFRS. The Group considers this non-GAAP measure to
be an important supplemental measure of the Group’s financial performance. Additionally, the Group believes this measure
is frequently used by investors, securities analysts and other interested parties to evaluate the efficiency of the Group’s
operations and its ability to employ its earnings toward repayment of debt, capital expenditures and working capital
requirements.
Adjusted EBITDA represents profit/(loss) before taxation, finance costs (including non-operating gains and losses in
respect of financial instruments), depreciation and amortisation, non-trading foreign exchange gains/(losses), share-based
compensation and exceptional costs. Adjusted EBITDA at segment level is consistently defined with the above but
excludes central administration costs including directors’ salaries.
The Adjusted EBITDA for the period was £15,885,000, a reconciliation can be found from the loss before tax to Adjusted
EBITDA for the period in note 3 to the financial statements.
2
AUCTION TOPCO LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Free cash flow
Free cash flow represents cash flow from operations less capitalised development costs, which include development costs
in relation to software that are capitalised when the related projects meet the recognition criteria under IFRS for an
internally generated intangible asset. Movement in working capital is adjusted for balances that relate to exceptional items.
During the period ended 30 September 2020, the free cash flow was £14,234,000. A reconciliation from Loss before tax
can be found below:
Loss before tax
Add back:
Net finance cost
Depreciation of PPE
Amortisation of Intangible assets
Depreciation of right of use
assets
Non-cash equity incentive
Exceptionals
Adjusted EBITDA
Working capital outflow1
Adjusted
operations
cashflows
from
Capital expenditure2
Free Cashflow
Note
3
6
10
9
12
7
5
9/10
Period ending 30
September 2020
£m
(18,979)
14,000
167
10,149
483
276
9,789
15,885
(238)
15,647
(1,385)
14,262
1 The cash outflow for movement in working capital consists of the movement in net working capital between the date of the acquisitions and the
period end. The working capital balance includes all trade and other receivables and all trade and other payables as recorded in notes 13 and 14
of these statements. No cash and cash equivalents have been included within the working capital movements.
2 Capital expenditure includes all capital additions to other intangibles (note 9) and property, plant and equipment (note 10), not including the
assets acquired as part of the acquisitions.
Non-financial key performance indicators
The Directors, on a regular basis, review other non-financial key performance indicators, the metrics reviewed include:
- Average daily visitors to each platforms
- Online share of the live auction market
- Number of new clients per platform
- Monthly trades per platform
- Weekly subscribers to the Antiques Gazette
The above measures are used by Management to assess their position in the market, their market share and the
performance on a segment by segment basis.
3
AUCTION TOPCO LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Principal risks and uncertainties
Due to the nature of the Group's business, and the assets and liabilities contained within the Group's balance sheet, the
only financial risks that the directors consider relevant to the group are credit risk through its trade debtors, interest rate
risk on loans and exchange rate risk on foreign currency. Credit risk is mitigated by credit control policies and the fact that
exposure is spread over a large number of customers. With increased international presence, the group recognises the
need to manage its exchange rate risk. In order to manage and consider the potential risks posed by movements in foreign
exchange rate, Management regularly review rates and consider the need for hedging through derivative financial
instruments. During the period Management did not feel the need to use derivatives as the level of foreign capital and
income received in the USA and the EU were offset through the level of cash held in its foreign bank accounts.
In light of recent events, there have been changes in the macroeconomic conditions as a result of the threat and uncertainty
posed by the Coronavirus outbreak.
The outbreak has resulted in potential risks to the business which are outlined below together with how these risks have
been mitigated.
The ability to work on a remote basis posed a potential risk to the business, however a robust control environment with
good IT processes and controls in place has enabled this to happen with limited impact on the business.
The closure of auction houses posed a potential risk to revenue from live auctions. However, the business has instead
experienced an acceleration in auction activity migrating from offline to online which has directly benefited the Group's
performance. The Group has also benefited from being more geographically diverse, due to its recent US acquisition, and
its portals which cater for insolvency auctioneers have benefited from the current macroeconomic environment.
The Group has sufficient liquidity to enable all operations of the business to continue. The Directors have considered this
and do not expect there to be an adverse impact to the company and its operations.
Other key risks that are specific to the Group include:
•
•
•
•
The Group’s business model may come under significant pressure should a significant number of auctioneers choose
to take bidder generation, technology development and customer service (amongst other things) in-house and so
bypass the marketplaces or platforms, including as a result of auctioneers who use the Group’s white label offering
attempting to maintain their own platforms rather than use the Group’s Platform.
The Group relies on its brand and reputation, which could be impaired.
The loss of senior executives or one or more of the Group’s key employees could adversely affect it business, results
of operations and financial condition.
The Group is subject to regulatory oversight by competition authorities, including the Competition and Markets
Authority in the UK, which may impact its acquisition activity.
4
AUCTION TOPCO LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Post reporting date events
Auction Technology Group plc (which was incorporated and has become the holding company for the Group following a
reorganisation) applied to (i) the FCA for the Shares to be admitted to the premium listing segment of the Official List of
the FCA and (ii) the London Stock Exchange for all of the Shares to be admitted to the London Stock Exchange's Main
Market for listed securities ("Admission"). The Admission became effective on 26 February 2021.
On 13 October 2020, a new secured borrowing facility was entered into with Macquarie and Sixth Street for
USD$33,500,000 (equivalent of £25,769,000). The loan carried an effective rate of interest of EURIBOR+6.5% payable
half yearly and is secured on the assets of the Group. The loan was repaid on 1 March 2021.
On 16 October 2020, ATG Media US Inc. acquired 100% of the equity share capital of Auction Mobility LLC for a total
maximum consideration of $43,308,000 (equivalent to £33,350,000), comprising of upfront cash consideration of
$33,000,000 (equivalent to £25,424,000), deferred consideration of $308,000 (£234,000) and a contingent consideration
of up to $10m (equivalent to £7,692,000), subject to the performance of the acquired company against certain targets.
The purpose of the acquisition was to further strengthen the Group’s presence in the US.
At the date of acquisition, Auction Mobility LLC had net assets on acquisition of $13,683,000 (equivalent to £10,525,000).
Approved by the board and signed on its behalf by:
T E Hargreaves
Director
25 May 2021
5
AUCTION TOPCO LIMITED
DIRECTORS’ REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
The Directors present the Director’s report and financial statements for the period ended 30 September 2020.
Principal activities
The Company was incorporated on 13 January 2020. The Company is an investment holding Company.
Results and dividends
The Consolidated Income Statement for the period is set out on page 14.
The Directors do not recommend payment of an ordinary dividend.
Directors
The following Directors have held office since 13 January 2020:
S A Dandl
T E Hargreaves
J Savant
J M Seigler III
C J Watt
B R Corcoran
Going concern
(appointed 13 January 2020, resigned 26 February 2021)
(appointed 13 February 2020)
(appointed 13 February 2020)
(appointed 13 January 2020, resigned 26 February 2021)
(appointed 13 February 2020, resigned 26 February 2021)
(appointed 28 December 2020, resigned 26 February 2021)
The Group has been admitted to the premium listing segment of the Official List of the FCA and London Stock
Exchange's Main Market for listed securities effective 26 February 2021. The following changes took place:
Primary proceeds were used to, amongst other things, repay all outstanding liabilities with financing parties
except for the loans under the Senior Facilities Agreement.
An Amendment and Restatement Deed resulted in £39.4m (US$43.2m and £8m) left outstanding under the
Senior Facilities Agreement. The loan principal is repayable on 10 February 2027.
A £20m general purpose undrawn Revolving Credit Facility (“RCF”) effective from 1 March 2021 is in place for
36 months.
In considering the forecast trading performance of the Company and the enlarged Group, the Directors have considered
the impact of the COVID-19 pandemic. The assessment made recognises the inherent uncertainty associated with any
forecasting at the present time.
The Group has performed strongly throughout the COVID-19 pandemic. This is largely due to the acceleration in auction
activity migrating from offline to online. The Group has also benefitted from being more geographically diverse, due to its
recent US acquisition, and its portals which cater for insolvency auctioneers which have benefitted from the current
macroeconomic environment. Due to recent performance the Directors believe that trading performance will remain
robust and do not expect any adverse scenarios where the operations of the Group are adversely affected by COVID-19.
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 has cash of
£44.7m as at 31 March 2021. 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.
6
AUCTION TOPCO LIMITED
DIRECTORS’ REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
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 worst-case
forecast. 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 highly 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.
Financial instruments
The Group’s principal financial instruments comprise bank balances, trade creditors, trade debtors, bank loans and loan
notes issued. The main purpose of these instruments is to raise funds to finance the Group’s operations.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of
the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at
fair value through profit or loss which are measured initially at fair value. Subsequent measurement of financial assets and
financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when
the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets are classified into the following
categories upon initial recognition:
• Financial assets at amortised cost
• Financial assets/liabilities held at fair value through profit or loss (FVTPL).
Financial assets at amortised cost
Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest
method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s
cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.
The Group recognises a loss allowance for expected credit losses (“ECL”) on financial assets that are measured at
amortised cost. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument.
7
AUCTION TOPCO LIMITED
DIRECTORS’ REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
The Group always recognises lifetime ECL on trade receivables. The expected credit losses on these financial assets are
estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction
of conditions at the reporting date, including time value of money where appropriate.
All income and expenses relating to financial assets that are recognised in the Consolidated Statement of Comprehensive
Income are presented within finance costs or finance income, except for impairment of trade receivables which is presented
within other administration expenses.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, convertible loan notes, trade and other payables and derivative financial
instruments.
Financial liabilities are measured at amortised cost using the effective interest method, except for financial liabilities held
for trading or designated at FVTPL, that are carried at fair value with gains or losses recognised in the Consolidated
Statement of Comprehensive Income.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in Consolidated
Statement of Comprehensive Income are included within finance costs or finance income.
Auditor
Deloitte LLP were appointed auditors to the Company and in accordance with section 485 of the Companies Act 2006, a
resolution proposing that they be re-appointed will be put at a General Meeting.
Statement of disclosure to auditor
So far as the Directors are aware, there is no relevant audit information of which the Group’s auditor is unaware.
Additionally, the Directors have taken all the necessary steps that they ought to have taken as Directors in order to make
themselves aware of all relevant audit information and to establish that the Group’s auditor is aware of that information.
Approved by the board and signed on behalf of the board.
T E Hargreaves
Director
25 May 2021
8
AUCTION TOPCO LIMITED
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law required the Directors to prepare financial statements in each financial year. Under the law the Directors
have elected to prepare the financial statements in accordance with International Financial Reporting Standards (‘IFRS’)
as adopted by the European Union. Under Company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and the Group’s
profit or loss for that period. In preparing the financial statements the Directors are also required to:
Select suitable accounting policies and apply them consistently.
Make judgements and estimates that are reasonable, relevant and reliable.
Assess the ability of the Group to continue as a going concern, disclosing as applicable, matters related to
going concern.
Use the going concern basis of accounting unless they intend to liquidate the Group or to cease operations or
they have no realistic alternative to doing so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Approved by the Board and signed on behalf of the Board.
T E Hargreaves
Director
25 May 2021
9
AUCTION TOPCO LIMITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUCTION TOPCO LIMITED
Report on the audit of the financial statements
Opinion
In our opinion:
the financial statements of Auction Topco Limited (the ‘parent company’) and its subsidiaries (the ‘group’) give a
true and fair view of the state of the group’s and of the parent company’s affairs as at 30 September 2020 and of
the group’s loss for the period from 13 January 2020 to 30 September 2020;
the group financial statements have been properly prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
the consolidated income statement;
the consolidated and parent company statements of financial position;
the consolidated and parent company statements of changes in equity;
the consolidated cash flow statement; and
the related notes 1 to 23.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by
the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
10
AUCTION TOPCO LIMITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUCTION TOPCO LIMITED
Other information
The directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a material misstatement in the financial statements
or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in respect of these matters.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We considered the nature of the group’s industry and its control environment and reviewed the group’s documentation of
their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management
about their own identification and assessment of the risks of irregularities.
We obtained an understanding of the legal and regulatory framework that the group operates in, and identified the key
laws and regulations that:
had a direct effect on the determination of material amounts and disclosures in the financial statements. These
included UK Companies Act and tax legislation; and
do not have a direct effect on the financial statements but compliance with which may be fundamental to the
group’s ability to operate or to avoid a material penalty. This included health & safety legislation.
11
AUCTION TOPCO LIMITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUCTION TOPCO LIMITED
We discussed among the audit engagement team including significant component audit teams and relevant internal
specialists such as tax, valuations and IT regarding the opportunities and incentives that may exist within the organisation
for fraud and how and where fraud might occur in the financial statements.
As a result of performing the above, we identified the greatest potential for fraud in the following area, and our specific
procedures performed to address it are described below:
We identified a significant risk of revenue misstatement associated with the completeness of auction
commission revenue, linked to any unmatched revenue transactions between the auction management system,
customer relationship management system and the accounting system. We obtained an understanding of
relevant controls in the revenue cycle and engaged our specialist analytics team to perform a reconciliation
between each system. Substantive tests of details were then performed around any unreconciled items of audit
interest and on a sample of transactions from reports extracted from the underlying systems.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override. In addressing the risk of fraud through management override of controls, we tested the
appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting
estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are
unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
reviewing financial statement disclosures by testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud;
enquiring of management and in-house legal counsel concerning actual and potential litigation and claims, and
instances of non-compliance with laws and regulations; and
reading minutes of meetings of those charged with governance.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the group and of the parent company and their environment obtained
in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
12
AUCTION TOPCO LIMITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUCTION TOPCO LIMITED
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report in respect of the following matters if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
We have nothing to report in respect of these matters.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Kate Darlison FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
Date: 25 May 2021
13
AUCTION TOPCO LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating loss
Finance income
Finance costs
Loss before tax
Taxation
Loss for the period
Other comprehensive loss for the period (net of tax)
Items that may subsequently be transferred to profit and loss
Foreign exchange loss on translation of foreign operations
Total comprehensive loss for the period
Note
Period from
incorporation to 30
September 2020
4
5
6
6
8
£’000
35,478
(15,042)
20,436
(25,594)
179
(4,979)
2
(14,002)
(18,979)
2,591
(16,388)
(440)
(16,828)
The profit for the period derives wholly from continuing operations and the Group has no non-controlling interests and all
profits are attributable to the equity holders of the Parent Company.
The financial statements were approved by the Board of Directors and authorised for issue on 25 May 2021 and are
signed on its behalf by
T E Hargreaves
Director
14
AUCTION TOPCO LIMITED
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2020
ASSETS
Non-current assets
Goodwill
Other intangible assets
Investments
Property, plant and equipment
Right of use asset
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Share-based payments reserve
Foreign exchange reserves
Accumulated losses
Total Equity
LIABILITIES
Non-current liabilities
Trade and other payables
Loans and borrowings
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Lease liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Group
Company
Note
30 September 2020
£’000
30 September 2020
£’000
9
9
11
10
12
13
13
18
14
15
12
17
14
15
12
124,023
74,830
-
478
1,924
88
201,343
8,653
14,193
22,846
224,189
11
1,125
276
(440)
(16,388)
(15,416)
2,100
213,444
1,208
11,588
228,340
9,350
1,159
756
11,265
239,605
224,189
-
-
112,503
-
-
4,822
117,325
200,606
-
200,606
317,931
11
1,125
276
-
(9,032)
(7,620)
199,723
-
-
-
199,723
-
125,828
-
125,828
325,551
317,931
A separate Statement of Comprehensive Income for Auction Topco Limited has not been prepared as permitted by
Section 408 of the Companies Act 2006. The loss of the Company for the year ended 30 September 2020 was
£9,032,000. The financial statements were approved by the Board of Directors and authorised for issue on 25 May 2021
and are signed on its behalf by
T Hargreaves
Director
15
AUCTION TOPCO LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Group
Comprehensive Loss
Loss for the period
Other comprehensive loss
Transactions with owners
Shares issued (equity)
Share issue costs (equity)
Share-based payments charge
Balance at 30 September 2020
Details of the nature of each reserve can be found in note 19.
Share
capital
£’000
Share
premium
£’000
Share-based
payments
reserve
£’000
Foreign exchange
reserves
£’000
Accumulated
losses
£’000
-
-
-
-
-
276
-
(440)
(440)
-
-
-
(16,388)
-
(16,388)
-
-
-
276
(440)
(16,388)
(15,416)
Total
£’000
(16,388)
(440)
(16,828)
1,140
(4)
276
-
-
-
11
-
-
11
-
-
-
1,129
(4)
-
1,125
16
AUCTION TOPCO LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Company
Comprehensive Loss
Loss for the period
Transactions with owners
Shares issued (equity)
Share issue costs (equity)
Share-based payments charge
Balance at 30 September 2020
Details of the nature of each reserve can be found in note 19.
Share
capital
£’000
Share
premium
£’000
Share-based payments
reserve
£’000
Accumulated losses
£’000
Total
£’000
(9,032)
(9,032)
1,140
(4)
276
(9,032)
(9,032)
-
-
-
(9,032)
(7,620)
-
-
11
-
-
11
-
-
1,129
(4)
-
1,125
-
-
-
-
276
276
17
AUCTION TOPCO LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Cash flows from operating activities:
Loss before tax
Amortisation of other intangible assets
Depreciation of property, plant and equipment
Depreciation of right of use assets
Share based payment expenses
Loss on disposal of property, plant and equipment
Foreign exchange gains
Net finance costs
Working capital adjustments
Increase in trade and other receivables
Increase in trade and other payables
Cash generated by operations
Income taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Additions to other intangible assets
Additions to property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Issue of share capital
Repayment of loans and borrowings
Proceeds of loans and borrowings
Contingent consideration paid
Proceeds from the issue of preference shares
Payment of lease liabilities
Interest paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the period
Note
For the period
from incorporation to
30 September 2020
9
10
12
9
20
9
10
21
21
20
21
11
£’000
(18,979)
10,149
167
483
276
10
(2)
14,000
6,104
(1,527)
2,248
721
6,825
(513)
6,312
(181,195)
(1,304)
(81)
(182,580)
857
(2,697)
86,088
(1,847)
111,859
(580)
(3,187)
190,493
14,225
-
(32)
14,193
For the period ended 30 September 2020, the Company did not have a bank account.
18
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1. General Information
Auction Topco Limited is a private company limited by shares domiciled and incorporated and registered in
England and Wales. The registered office address is The Harlequin Building, 6th Floor, 65 Southwark Street,
London, United Kingdom, SE1 0HR.
The principal activity of Auction Topco Limited and its subsidiaries is the provision of auction technology
software and related services to auction houses and other customers.
The financial statements are presented in Pounds Sterling, which is also the Company’s functional currency.
The historical financial information is prepared on the historical cost basis, except for contingent
consideration, which is stated at their fair value.
Impact of Brexit
There continues to be uncertainty regarding the UK’s withdrawal from the European Union (“EU”) (referred
to as “Brexit”). Potential adverse consequences of Brexit such as global market uncertainty, volatility in
currency exchange rates, greater restrictions on imports and exports between UK and EU countries and
increased regulatory complexities may have an impact on the business, financial condition and result of
operations of UK businesses. However, the nature of the Group’s operations is such that each of its core
businesses operates principally within its own territory with relatively low levels of cross-border trading
between the UK and the EU, Brexit is not currently expected to have a significant impact on the Group’s
business, financial conditions or results of operations.
Impact of COVID-19
There continues to be uncertainty regarding the impact of the coronavirus pandemic on businesses
throughout the country. The adverse consequences of the pandemic such as global market uncertainty,
closure of businesses and macroeconomic factors reducing discretionary expenditure may have an impact
on the financial condition and results the Group. However, the nature of the Group’s operations is such that
the three segments diversify the Group’s exposure to a recession, whilst the platforms offer businesses a
market place to sell their goods. Further the pandemic has accelerated the transition of activity from offline
to online which has directly benefitted the Group. These factors have limited the impact of the coronavirus
pandemic on the Group.
Going concern
The Group has been admitted to the premium listing segment of the Official List of the FCA and London
Stock Exchange's Main Market for listed securities effective 26 February 2021. The following changes took
place:
Primary proceeds were used to, amongst other things, repay all outstanding liabilities with
financing parties except for the loans under the Senior Facilities Agreement.
An Amendment and Restatement Deed resulted in £39.4m (US$43.2m and £8m) left outstanding
under the Senior Facilities Agreement. The loan principal is repayable on 10 February 2027.
A £20m general purpose undrawn Revolving Credit Facility (“RCF”) effective from 1 March 2021 is
in place for 36 months.
In considering the forecast trading performance of the Company and the enlarged Group, the Directors
have considered the impact of the COVID-19 pandemic. The assessment made recognises the inherent
uncertainty associated with any forecasting at the present time.
The Group has performed strongly throughout the COVID-19 pandemic. This is largely due to the
acceleration in auction activity migrating from offline to online. The Group has also benefitted from being
more geographically diverse, due to its recent US acquisition, and its portals which cater for insolvency
19
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1. General Information (continued)
Going concern (continued)
auctioneers which have benefitted from the current macroeconomic environment. Due to recent
performance the Directors believe that trading performance will remain robust and do not expect any
adverse scenarios where the operations of the Group are adversely affected by COVID-19.
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 has cash of £44.7m as at 31 March 2021. 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 worst-case forecast. 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 highly 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.
20
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Accounting Policies
1.1.
Basis of Preparation
The financial statements of the Group and the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS) and its interpretations as adopted by the European
Union (EU) and effective at 30 September 2020, and those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The consolidated Group financial statements are presented in Pounds
Sterling, generally rounded to the nearest thousand. The financial statements are prepared on the historical
cost basis, except for certain financial instruments that have been measured at fair value.
New standards, interpretations and amendments issued not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued
by the EU that are effective in future accounting periods that the Group has decided not to adopt early.
The following standards were in issue but have not come into effect:
Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 on Interest Rate Benchmark Reform
IFRS 3 Business Combinations
IAS 16 Property, Plant and Equipment;
IFRS 10 and IAS 38; Classification of liabilities as current and non-current
IFRS 17: Insurance Contracts
IAS 37: Provisions
The Directors anticipate that the adoption of planned standards and interpretations in future periods will not
have a material impact on the financial statements of the Group.
The Group’s significant accounting policies are set out below.
1.2.
Basis of consolidation
The consolidated Group financial statements consist of the financial statements of the ultimate Parent
Company, all entities controlled by the Company.
Control is achieved where the Company has the power to govern the financial and operating policies of an
investee entity, has the rights to variable returns from its involvement with the investee and has the ability
to use its power to affect its returns. The results of subsidiaries acquired or sold are included in the
financial information from the effective date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to the results of acquired subsidiaries to bring their
accounting policies into line with those used by the Group.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
21
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.2
Basis of consolidation (continued)
Employee benefit trust
The assets and liabilities of the Employee Benefit Trust (EBT) have been included in the consolidated
financial statements. Any assets held by the EBT cease to be recognised on the Consolidated Statement of
Financial Position when the assets vest unconditionally in identified beneficiaries.
The costs of purchasing own shares held by the EBT are shown as a deduction against equity. The
proceeds from the sale of own shares held increase equity. Neither the purchase nor sale of own shares
leads to a gain or loss being recognised in the Consolidated Statement of Comprehensive Income.
Business combinations
The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the
acquisition date fair values of assets transferred, liabilities incurred, and the equity interests issued by the
Group, which includes the fair value of any asset or liability arising from a contingent consideration
arrangement. Acquisition costs are expensed as incurred.
When the consideration transferred by the Group in a business combination includes a contingent
consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business combination. Changes in fair value of the
contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise
from additional information obtained during the 'measurement period' (which cannot exceed one year from
the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify
as measurement period adjustments depends on how the contingent consideration is classified. Contingent
consideration that is classified as equity is not remeasured at subsequent reporting dates and its
subsequent settlement is accounted for within equity. Other contingent consideration is remeasured to fair
value at subsequent reporting dates with changes in fair value recognised in profit or loss.
Identifiable assets acquired and liabilities assumed are measured at their acquisition date fair values.
Goodwill is stated after separate recognition of other identifiable intangible assets.
If the accounting for business combinations involves provisional amounts, which are finalised in a
subsequent reporting period during the 12-month measurement period as permitted under IFRS 3,
restatement of these provisional amounts may be required in the subsequent reporting period.
1.3.
Foreign currency
Functional and presentational currency
Items included in the financial statements of each of the Group's entities are measured using the currency
of the primary economic environment in which the entity operates ("the functional currency"). The
consolidated financial statements are presented in Pounds Sterling.
22
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.3
Foreign currency (continued)
Transactions and balances
Transactions denominated in foreign currencies are translated into the functional currency at the exchange
rates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated into Pounds Sterling at the rates of exchange at the reporting date. Exchange
differences on monetary items are taken to the profit and loss.
Group companies
On consolidation, the assets and liabilities of foreign operations are translated into Pounds Sterling at the
rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at the
average exchange rates for the year. Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in a foreign exchange translation reserve. On disposal of a
foreign operation, the component of other comprehensive income relating to that foreign operation is
recognised in profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the acquisition closing rate. This is then revalued at the
year-end rate with any foreign exchange difference taken directly to the translation reserve.
1.4.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses.
Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its
working condition for its intended use.
Depreciation is charged to the Consolidated Statement of Comprehensive Income over the estimated
useful lives of each part of an item of property, plant and equipment. The Directors reassess the useful
economic lives and estimated residual values on an annual basis.
The estimated useful lives are as follows:
Leasehold improvements
Computer equipment
Fixtures and fittings
14-33% straight line
20-33% straight line
20-33% straight line
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between
the net sale proceeds and the carrying amount of the asset and is recognised in the Statement of
Comprehensive Income.
23
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.5.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation
and impairment losses.
Expenditure on research activities is recognised as an expense in the period in which is it incurred.
Included within software are development costs in relation to software which are capitalised when the
related projects meet the recognition criteria of an internally generated intangible asset, the key criteria
being as follows:
technical feasibility of the completed intangible asset has been established;
it can be demonstrated that the asset will generate probable future economic benefits;
adequate technical, financial and other resources are available to complete the development;
management has the ability and intention to use or sell the asset.
the expenditure attributable to the intangible asset can be reliably measured; and
These projects are designed to enhance the existing software within the Group. Salaries associated with
development time and directly attributable overheads are capitalised within intangible assets. Refer to note
2 – Significant judgments and sources of estimation uncertainty.
Development costs recognised as assets are amortised on a straight-line basis over their expected useful
life. Development expenditure is only amortised over the period the Group is expected to benefit and is
subject to annual impairment testing.
The estimated useful life and amortisation method are reviewed at the end of each reporting period, with
the effect of any changes in estimate being accounted for on a prospective basis.
Amortisation relating to capitalised software development costs is recognised through cost of sales whilst
amortisation in respect non-software intangibles are recognised through administrative expenses.
Amortisation is charged to the Consolidated Statement of Comprehensive Income on a straight-line basis
over the estimated useful lives of intangible assets unless such lives are indefinite. The estimated useful
lives are as follows:
Software
Brand
Customer relationships
33% per annum straight line
10% per annum straight line
14% per annum straight line
Intangible assets acquired in a business combination and recognised separately from goodwill are
recognised initially at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost
less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
that are acquired separately.
1.6.
Goodwill
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment
testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating
units) expected to benefit from the synergies of the combination. Cash-generating units to which goodwill
has been allocated are tested for impairment annually, or more frequently when there is an indication that
the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
24
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.7.
Impairment of non-financial assets (excluding goodwill)
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset
belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss to the extent that it eliminates the impairment loss which has been
recognised for the asset in prior years.
1.8.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly
liquid investments with original maturities of three months or less.
1.9.
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs,
except for those carried at fair value through profit or loss which are measured initially at fair value.
Subsequent measurement of financial assets and financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories
upon initial recognition:
Financial assets at amortised cost
Financial assets/liabilities held at fair value through profit or loss (FVTPL).
25
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.9
Financial instruments (continued)
Recognition, initial measurement and derecognition
Financial assets at amortised cost
Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. After initial recognition, these are measured at amortised cost
using the effective interest method, less provision for impairment. Discounting is omitted where the effect of
discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall
into this category of financial instruments.
The Group recognises a loss allowance for expected credit losses (“ECL”) on financial assets that are
measured at amortised cost. The amount of expected credit losses is updated at each reporting date to
reflect changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL on trade receivables. The expected credit losses on these
financial assets are estimated using a provision matrix based on the Group’s historical credit loss
experience, adjusted for factors that are specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast direction of conditions at the reporting date,
including time value of money where appropriate.
All income and expenses relating to financial assets that are recognised in the Consolidated Statement of
Comprehensive Income are presented within finance costs or finance income, except for impairment of
trade receivables which is presented within other administrative expenses.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, convertible loan notes, trade and other payables and
derivative financial instruments.
Financial liabilities are measured at amortised cost using the effective interest method, except for financial
liabilities held for trading or designated at FVTPL, that are carried at fair value with gains or losses
recognised in the Consolidated Statement of Comprehensive Income.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in
Consolidated Statement of Comprehensive Income are included within finance costs or finance income.
1.10. Revenue recognition
The Group recognises revenue when it has transferred the promised services to customers in an amount
that reflects the consideration to which they expect to be entitled in exchange for those services.
Auction services
Auction revenues include commissions (based on a percentage of the price of items sold at auction),
auction fees (both pay-as-you-go and subscription based) and other fees, including fees to promote listings
and catalogue fees. The Group recognises commission fees as an agent on the basis that there is no
contractual relationship with the end-consumer of goods sold at auction and the Group will receive its
commission irrespective of whether the end-consumer makes its payment to the auction house.
26
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.10
Revenue recognition (continued)
Contracts will typically specify an event (pay-as-you-go) or period of time during which the auction house
may host a number of events (subscription) as well as other auction-related services including mirrored
bidding, customer support, buy-it-now functionality, online cataloguing and the provision of personnel to
operate the auction. These contracts are deemed to represent a single performance obligation, on the
basis that the customer could not benefit from the auction-related services without also having access to
the auction platform, and therefore are not distinct performance obligations.
Auction revenues sold under subscription-based contracts, in which the performance obligation is the
provision of access to the technology platform and any auction-related services specified in the contract for
that period of time, are recognised straight-line over the term of the contract. This recognition reflects the
fact that the contract allows for continuous usage of the technology platform and its functionality together
with any auction-related services.
Auction revenues sold under pay-as-you-go contracts result in in a performance obligation that is satisfied
by providing access for the duration of that specific auction. As auctions typically complete within 1-3 days,
the Company recognises revenue on completion of the auction.
The commission element of both subscription and pay-as-you-go contracts is based on the value of the
items sold at auction and as such is subject to inherent uncertainty and cannot be estimated reliably in
advance. The Group has determined that it is not possible to make a reliable estimate of the commissions
that will be earned under a particular contract and as such the commission element of auction revenue is
not recognised until the auction has completed and the revenue value is known.
Marketing services
Marketing revenues are principally derived from banner advertising and fees generated from email
campaigns. Revenue is recognised in line with the satisfaction of the campaign objectives (i.e. at the point
that the campaign emails are sent or over the period that the banner is provided on the website).
Content-related services
Content-related services primarily includes print advertising revenues and subscriptions to the Gazette.
The Group identified one performance obligation for print advertising services which is to include the advert
in a particular edition of the Gazette. The performance obligation is satisfied and revenue is recognised at
the point that the magazine is published. Where the advert is featured in a number of editions, the
performance obligation is satisfied over the period that the advertisement is featured. Revenue is
recognised evenly over the period that the advertisement is featured.
For magazine subscriptions, customers receive a specified number of editions during the subscription
period. Revenue is recognised evenly over the subscription period.
Contract balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets
represent revenue recognised prior to invoicing when it has satisfied its performance obligation and have
the unconditional right to payment.
Contract liabilities consists of fees received related to unsatisfied performance obligations at the end of the
period.
27
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.11.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax.
Tax is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it
relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates and laws
enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a business combination; and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates and laws enacted or substantively enacted at the
balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future
taxable profits will be available against which the asset can be utilised.
The carrying amounts of deferred tax assets are reviewed at each balance sheet date.
1.12. Employee benefits
Short term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A provision is recognised for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognized as an expense in the
Consolidated Statement of Comprehensive Income as incurred.
1.13. Share based payments
The Group measures the cost of services received in exchange for share options based on the grant‐date
fair value of the award and recognises the cost over the period of required service for the award. The
Group accounts for awards of shares to employees as share‐based compensation as they vest.
Share options issued to employees are measured at fair value at the grant date and are recognised as an
expense over the relevant vesting periods with a corresponding credit to reserve for share-based
payments. Share options issued to non-employees are measured at either the fair value of goods or
services received, or the fair value of equity instruments issued if it is determined that the fair value of the
goods or services cannot be reliably measured. The fair value of non-employee share options is recorded
as an expense at the date the goods or services are received.
The fair value of options is calculated using an option pricing model. When determining the fair value of
share options, management is required to make certain assumptions and estimates related to expected
lives, volatility, risk-free rate, future dividend yields and estimated forfeitures at the initial grant date.
The number of options expected to vest is reviewed and adjusted at the end of each reporting period such
that the amount recognised for services received as consideration for the equity instruments granted shall
be based on the number of equity instruments that eventually vest. Amounts recorded for forfeited or
expired unexercised options are transferred to share capital in the year of forfeiture or expiry. Upon the
28
exercise of share options, proceeds received from share option holders are recorded as an increase to
share capital.
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.14.
Leases
As a lessee
A contract, or a portion of a contract, is accounted as a lease when it conveys the right to use an asset for
a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria:
There is an identified asset;
The Group obtains substantially all the economic benefits from use of the asset; and
The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights. If the supplier does have
those rights, the contract is not identified as giving rise to a lease. In determining whether the Group
obtains substantially all the economic benefits from use of the asset, the Group considers only the
economic benefits that arise from use of the asset. In determining whether the Group has the right to direct
use of the asset, the Group considers whether it directs how and for what purpose the asset is used
throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the
Group applies other applicable IFRS rather than IFRS 16.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the
lease term, with the discount rate determined by reference to the rate inherent in the lease unless this is
not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the
lease is used. Variable lease payments are only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the
variable element will remain unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
Amounts expected to be payable under any residual value guarantee;
The exercise price of any purchase option granted in favour of the Group if it is reasonably certain
to assess that option; and
Any penalties payable for terminating the lease, if the term of the lease has been estimated based
on termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease
incentives received, and increased for:
Lease payments made at or before commencement of the lease;
The amount of any provision recognised where the Group is contractually required to dismantle,
Initial direct costs incurred; and
remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant
rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are
amortised on a straight-line basis over the remaining term of the lease.
The Group has elected not to recognise right of use assets and lease liabilities for leases of low-value
assets and short-term leases. The Group recognises the lease payments associated with these leases as
an expense on a straight-line basis over the lease term.
29
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
1.14
Leases (continued)
As a lessor
The Group enters into lease agreements as a lessor with respect of some of its leased properties.
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of
the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is
classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sub-lease as two
separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-of-
use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying
amount of the leased asset and recognised on a straight-line basis over the lease term.
1.15. Exceptional costs
As permitted by IAS 1 ‘Presentation and Disclosure’ certain items are disclosed separately from other
administrative expenses in note 5 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 underlying business performance. These items have been disclosed separately in note 5.
These items include restructuring costs, which Management deem to be exceptional due to the costs
associated with any significant restructuring and acquisition and listing costs which Management consider
to be exceptional due to the strategically implemented acquisitions and the costs relating to the post year
end IPO which in the opinion of the Directors do not relate to the Group’s underlying trading and are
adjusted from the Group’s measure of segment performance, Adjusted EBITDA (refer to note 3).
2.
Significant judgments and key sources of estimation uncertainty
In the application of the Group’s accounting policies, the Directors are required to make judgments,
estimates and assumptions about the carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised where the
revision affects only that period, or in the period of the revision and future periods where the revision
affects both current and future periods.
2.1.
Significant judgments
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 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 the Directors. 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.
Judgement is also required in determining appropriate useful economic lives (“UEL”) of the
intangible assets arising from business combinations. The Directors make this judgement on an
asset class by asset class basis and have determined that contracts with customers have a UEL of
seven years; brands have a UEL of ten years, and software development costs have a UEL of
30
three years.
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
2.1
Significant judgments (continued)
Revenue recognition (note 4)
Determining whether performance obligations should be accounted for separately or combined may
require significant judgement. Judgement has been applied in determining whether associated
services, such as the mirrored bidding, occupies a distinct service. Management have determined
that these supplementary performance obligations are separate.
In determining when to recognise subscription auctioneer services, management assessed how
many auctions each auction house is likely to hold over the course of the contract. In making this
judgement management have considered the previous year’s trading activity as well as the fair
usage clause incorporated in each contract. Management have determined that the most
appropriate policy is to recognise revenue arising from this revenue stream over the life of the
contract on a straight-line basis given that contracts are in substance stand-ready arrangements.
For commissions arising from subscription contracts, management have determined that
attempting to estimate future lot sales values (which the commissions are based upon) would be
constraining and infeasible and have therefore made the judgement to recognise the commissions
arising from auctioneer services at the point the auction ends.
2.2.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial year are as follows:
Goodwill and Other intangible assets impairment reviews (note 9)
At each reporting year-end date, the Group reviews the carrying amounts of goodwill and intangible
fixed assets to determine whether there is any indication that those assets have suffered an
impairment loss.
The value in use calculation requires the Group to estimate the future cash flows expected to arise
from the CGU and a suitable discount rate in order to calculate present value. The carrying value of
goodwill and other intangible assets at 30 September 2020 is £198,053,000. See note 9 for details of
the test for impairment.
The key assumptions, relevant to the assessment at 30 September 2020 are:
Projected cash flows
The estimated future cash flows used to assess the impairment of goodwill are based on
management’s assumptions. The three-year forecasts performed at each year-end represent the
latest detailed forecasts by management at each reporting date, the 2020 year-end forecast has
also been based on the COVID-19 containment measures in the markets in which the Group
operates.
If the Group's forecasted cash flows, and terminal cash flows were to reduce by 100bp in each
reporting period, the Group's goodwill would not be impaired.
31
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
2.2
Key sources of estimation uncertainty (continued)
Discount rates
The estimated future cash flows used to assess the impairment of goodwill and other intangibles
assets are based on management’s assumptions. A weighted average cost of capital of 13.5% has
been assumed in assessing the value in use for all three cash generating units. The discount rate
would have to increase by 200 bps to result in an impairment of goodwill at 30 September 2020.
3.
Segmental reporting
Management has determined the operating segments based on information reviewed by the Board of
Directors (the Chief Operating Decision Maker (CODM)), 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 of Directors has determined an operating management structure aligned around the three
core activities of the Operating Group, with the following operating segments applicable:
Arts and Antiques (“A&A”): focused on offering auction houses that specialise in the sale of arts
and antiques access to the platforms the-Saleroom.com and lot-tissimo.com. A significant part of
the services is provision of the platform as a marketplace for the A&A auction houses to sell their
goods. The segment also generates earnings through additional services such as the marketing
income. 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 and Commercial (“I&C”): focused on offering auction houses that specialise in the
sale of industrial and commercial goods and machinery access to the platforms Bidspotter.com,
Proxibid.com iBidder.com and Wavebid.com. A significant part of the 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 the marketing income. The business
contracts with customers predominantly under service agreements, where the number of auctions
to be held and the service offering differs from client to client.
Content: focused on the Gazette trade paper and online trade magazine. The business focusses
on two streams of income: selling subscriptions to the Gazette and also selling advertising space
within the paper and online. Content does not meet the reportable segment thresholds established
under IFRS 8 for the year ended 30 September 2020; however, the Company want to report on
these for transparency purposes.
The accounting policies of the reportable segments are the same as those described in the accounting
policies section. Segment profit includes an allocation of Group, central overheads consistent with
information presented to the CODM.
There are no un-disclosed or other operating segments. As a result of the Auction Mobility acquisition
in October 2020, the Group’s operating segments may change in the year ending 30 September 2021
to include a fourth operating segment.
32
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
3.
Segmental reporting (continued)
An analysis of the results for the period by reportable segment is as follows:
2020
A&A
£’000
I&C
Content
Centrally
allocated
costs
£’000
£’000
£’000
Total
£’000
Revenue
8,539
25,337
1,602
-
35,478
Adjusted EBITDA
7,087
20,270
513
(11,985)
15,885
Reconciliation from Adjusted EBITDA to Loss before
tax
Net finance costs
Depreciation of property, plant and
equipment
Amortisation of intangible assets
Depreciation of right of use assets
Share based payments expense
(note 7)
Exceptional costs (note 5)
Loss before tax
(14,000)
(167)
(10,149)
(483)
(276)
(9,789)
(18,979)
The accounting policies of the reportable segments are the same as the Group’s accounting policies
described in note 1. The profit measure the Group uses to evaluate performance is Adjusted EBITDA.
Adjusted EBITDA represents the profit or (loss) before taxation, finance costs (including non-operating gains
and losses in respect of financial instruments), other income, depreciation and amortisation, share-based
payments expense and exceptional costs. Adjusted EBITDA at segment level is consistently defined with the
above but excludes central administration costs including Directors’ salaries.
The Group considers this non-GAAP measure to be an important supplemental measure of the Group’s
financial performance. Additionally, the Group believes this measure is frequently used by investors,
securities analysts and other interested parties to evaluate the efficiency of the Group’s operations and its
ability to employ its earnings toward repayment of debt, capital expenditures and working capital
requirements.
33
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
3.
Segmental reporting (continued)
The Group does not monitor segmental asset by geography or segmental debtors, and therefore have not
disclosed this below.
The Group does not currently monitor the non-current tangible, intangible and financial assets attributable to
each segment, however these disclosures have been voluntarily provided on the basis that the Group intends
to monitor this going forward. All assets are allocated to reportable segments.
Total
£’000
56,857
162,576
4,756
224,189
Total
£’000
2,549
7,753
497
10,799
Total
£’000
53,583
154,395
4,086
212,064
Segment assets
A&A
I&C
Content
Total and consolidated segment assets
Segment depreciation and amortisation
A&A
I&C
Content
Total segment and consolidated depreciation and amortisation
Net additions to non-current assets
A&A
I&C
Content
Total segment and consolidated additions to non-current assets
34
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
4.
Revenue
An analysis of turnover by class of business is given below:
Product and customer types
A&A
I&C
Content
Primary geographical markets
United Kingdom
USA
Germany
Timing of transfer of goods and services
Point in time
Over time
5.
Operating loss, auditor’s remuneration and exceptional costs
(a) Group operating loss is stated after charging/(crediting) the following:
Net foreign exchange losses
Research and development costs
Amortisation of other intangible assets (note 9)
Depreciation of property, plant & equipment (note 10)
Loss on disposal of property, plant and equipment (note 10)
Depreciation of right of use assets (note 12)
Share-based payments expense (note 7)
For the period from
incorporation to
30 September 2020
£’000
8,539
25,337
1,602
35,478
9,605
24,116
1,757
35,478
32,554
2,924
35,478
For the period from
incorporation to
30 September 2020
£’000
139
98
10,149
167
10
483
276
35
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
5.
Operating loss, auditor’s remuneration and exceptional costs (continued)
(b) Auditor’s remuneration
Fees payable to the Group’s auditor for the audit of the Group’s annual
financial statements
Fees payable to the Group’s auditor and its associates for other services
audit of the Group’s subsidiaries
other non-audit assurance services
For the period from
incorporation to
30 September 2020
£’000
234
156
240
630
Costs in relation to other non-audit assurance services have been incurred in respect of fees associated with
acquisitions and listing. These have been categorised as exceptional items as per section c), as detailed
below.
(c) Exceptional items
The Board considers certain items to be exceptional, due to their nature or infrequency, such presentation is
relevant to an understanding of the Group’s performance. These items do not relate to the Group’s underlying
trading and are adjusted from the Group’s adjusted operating profit measure (refer to note 3).
Acquisition and listing costs
Restructuring costs
For the period from
incorporation to
30 September 2020
£’000
7,963
1,826
9,789
The principal exceptional costs are in respect of the following:
•
•
Acquisition and listing costs comprise legal, professional and incidental expenditure incurred during
the period in relation to acquisition activity and the anticipated listing on the London Stock Exchange.
The business has undertaken focused acquisitive actively in the periods prior to the anticipated
listing, which has been strategically implemented to increase income, service range and critical mass
of the Group, not least in anticipation of the listing of the Group on the London Stock Exchange
(“IPO”) in the post-reporting period. The listing costs incurred in preparing for the anticipated IPO
are also included as exceptional.
Restructuring costs comprise costs levied by professional advisors and redundancy costs in
connection with restructuring activities.
36
37
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
6.
Finance costs and income
Finance income
Finance cost on secured loan
Interest payable on contingent consideration
Interest on lease liabilities (note 12)
Interest payable on preference shares
Finance cost on loan notes
Finance Costs
Net Finance costs
7.
Employee information
Wages and salaries
Social security costs
Other pension costs
Share based payments expense
Group
For the period from
incorporation to
30 September 2020
£’000
2
4,016
31
71
8,886
998
14,002
14,000
Group
For the period from
incorporation to
30 September 2020
£’000
12,007
1,085
195
276
13,563
The average number of persons, including Directors, employed during the period was:
Management
Administrative staff
Operational staff
Group
For the period from
incorporation to
30 September 2020
7
66
106
179
No Director received any emoluments for services to this company. There are no employees remunerated
by this Company.
38
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
7.
Employee information (continued)
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing,
and controlling the activities of the entity, directly or indirectly, including any directors (whether executive or
otherwise) of the entity.
The Director’s consider that key management personnel (KMP) are those persons who are members of the
Board of Auction Topco Limited, as parent company of the Group.
Short-term employment benefits
Post-employment benefits
Share-based payments expense
Group
For the period from
incorporation to
30 September 2020
£’000
1,259
19
276
1,554
The remuneration of the highest paid Director during the period was £306,000.
During the period six of the Directors were entitled to accrue retirement benefits under money purchase
schemes.
Share-based payments
The Company has issued KMP B Ordinary shares in exchange for continued service. The Company has
issued KMP B Ordinary shares to management and certain employees. The holders are subject to a service
condition and, as such, the shares represent remuneration for service thereby constituting an IFRS 2 equity
settled, share based arrangement. The shares vest over four years from the grant date or upon an exit event,
whichever arises first. The shares have been valued at the grant date using a Black Scholes option pricing
model, based on an Enterprise-Value multiple.
The B Ordinary shares issued in the period are as follows:
On 13 February 2020, 116,675 B ordinary shares were issued to KMP at £1.60 per share. The fair value of
this issue was £882,000. The Company will recognise the fair value through profit and loss over vesting
period which is deemed to be two years.
On 30 September 2020, 35,633 B ordinary shares were issued to KMP at a value of £1.60 per share, as set
out in note 22.
All 152,338 B Ordinary shares issued in the period were outstanding at period end, with none being forfeited.
The Group recognised total expenses of £276,000 relating to the B Ordinary share-based payment
transactions in the period ended 30 September 2020. All relates to the remuneration of KMP.
39
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
8.
Taxation
Analysis of the tax credit recognised in the period
Current tax expense
Current period
Total current tax
Deferred tax
Origination and reversal of timing differences (note 17)
Total deferred tax
Total income tax credit
For the period from
incorporation to
30 September 2020
£’000
(2,174)
(2,174)
4,765
4,765
2,591
The standard rate of corporation tax applied to the loss is 19%. Post year end, following the announcement
of the 2021 Budget, the tax rate within the United Kingdom is anticipated to increase from 19% to 25% over
the next two years. This will have the impact of increase the corporation tax charge and increasing the
deferred tax asset on unutilised losses (note 17).
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The tax assessed for the period is lower than the standard rate of corporation tax in the UK. The differences
are explained below.
Reconciliation of effective tax rate:
Loss before tax
Loss before tax multiplied by the standard rate of
corporation tax in the UK of 19%
Tax effect of:
Expenses not deductible for tax purposes
Differences in US tax rate
Deferred tax assets not recognised
Adjustment to tax charge in respect of deferred tax arising on acquisition
Adjustment to tax charge in respect of current periods deferred tax
Total tax credit
For the period from
incorporation to
30 September 2020
£’000
(18,979)
(3,606)
3,388
70
102
(3,218)
673
(2,591)
40
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
8.
Taxation (continued)
The Group’s tax affairs are governed by complex local tax regulations in the UK, US and Germany. Given
the uncertainties that could arise in the application of these regulations, judgments 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 amounted to £1,576,000 at 30 September 2020.
9.
Intangible assets
Group
Goodwill
Software
Customer
relationships
Brand
Total
£’000
£’000
£’000
£’000
£’000
Cost
Additions through business combinations
(note 20)
Additions
124,023
17,963
- 1,304
54,429
207,698
- - 1,304
11,283
At 30 September 2020
124,023
19,267
54,429
11,283 209,002
Amortisation and impairment
Amortisation charge for the period
At 30 September 2020
Net book value
-
-
4,804
4,804
4,717
4,717
628
10,149
628 10,149
At 30 September 2020
124,023
14,463
49,712
10,655 198,853
During the period £434,000 of research and development costs were capitalised as software.
Impairment testing for cash-generating units containing goodwill
As goodwill is not amortised, the Group tests goodwill for impairment on an annual basis, or more frequently
if there are indicators of impairment. The impairment assessment is performed by considering the
recoverable amount of individual cash-generating units against carrying value.
The Group tests for impairment of goodwill at the operating segment level (see Note 3) representing an
aggregation of CGUs reflecting the level at which goodwill is monitored. Intangible assets are tested for
impairment at the individual CGU level.
The impairment testing of goodwill involved testing for impairment at a segment level by aggregating the
carrying value of assets across CGUs in each division and at a segment level and comparing this to value in
use calculations derided from the latest Group cash flow projections.
41
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
9.
Intangible assets (continued)
There were three groups of CGUs for goodwill impairment testing and these matched the three operating
segments in all three reporting periods. The carrying amount of goodwill recorded in the CGU groups is set
out below:
2020
£’000
A&A
I&C
Content
32,692
91,331
-
124,023
The recoverable amount for CGU groups has been determined on a value in use basis. The key assumptions
are those regarding the projected operating cash flows, the long-term growth rate and the discount rates
applied.
Estimated future cash flows are determined by reference to the budget for the year following the balance
sheet date and forecasts for the following two years, after which a long-term perpetuity growth rate is applied.
The most recent financial budget approved by the Board of Directors has been prepared after considering
the current economic environment in each of the Group’s markets. These projections represent the Director’s
best estimate of the future performance of these businesses.
The pre-tax discount rates used in the value in use calculations represent the Group’s assessment of the
current market and other risks specific to the CGUs.
Long term growth rates are applied after the forecast period. These are based on external 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.
The Group has undertaken a sensitivity analysis based on changes to key assumptions considered to be
reasonably possible by management. These sensitivities of revenue growth rate and operating profit growth
rate have been considered as to whether they are reasonably possible to either erode headroom or give risk
of material adjustment to carrying values, across CGU groups. Results for both goodwill and intangibles
testing showed that no CGU was at risk of impairment when applying these reasonably possible sensitivity
scenarios.
Arts & Antiques (‘A&A’)
The recoverable amount of the A&A segment as a cash-generating unit is determined based on a value in
use calculation which uses cash flow projections based on financial budgets approved by the Directors
covering a three-year period, and a pre-tax discount rate of 12% per annum.
In each reportable period, the value in use model assumes an annual sales growth rate over the three-year
forecasted period of 10% to 15% per cent and a cash flow growth of 21% to 34%. In the period, cash-flow
growth would have to fall by 1500 basis points (15%) for any impairment to occur.
The Directors estimate that a change in the discount rate of 800 basis points (8%) to a revised discount rate
of 20%. would reduce the headroom in the cash-generating unit at each reporting date, however would not
result in an impairment charge.
A terminal growth rate of three per cent. has been used to derive the terminal value in the value in use model.
42
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
9.
Intangible assets (continued)
Industrial & Commercial (‘I&C’)
The recoverable amount of the I&C segment as a cash-generating unit is determined based on a value in
use calculation which uses cash flow projections based on financial budgets approved by the Directors
covering a three-year period, and a pre-tax discount rate of 12% per annum.
In each reportable period, the value in use model assumes an annual sales growth rate over the three-year
forecasted period of 10% to 15% per cent and a cash flow growth of 21% to 34%. In the period, cash-flow
growth would have to fall by 1500 basis points (15%) for any impairment to occur.
The Directors estimate that a change in the discount rate of 800 basis points (8%) to a revised discount rate
of 20%. would reduce the headroom in the cash-generating unit at each reporting date, however would not
result in an impairment charge.
A terminal growth rate of three per cent has been used to derive the terminal value in the value in use model.
10. Property, plant and equipment
Group
Cost
Additions through business combinations (note 20)
Additions
Disposals
At 30 September 2020
Depreciation and impairment
Depreciation charge for the period
At 30 September 2020
Net book value
At 30 September 2020
Land and
buildings
leasehold
£’000
Computer
equipment
£’000
Fixtures,
fittings and
equipment
£’000
Total
£’000
239
10
-
249
37
37
243
43
-
286
89
89
92
28
(10)
110
41
41
574
81
(10)
645
167
167
212
197
69
478
The Company did not have any property, plant and equipment during the period ended 30 September 2020.
Details of security over assets are provided in note 15.
43
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
11. Investment in subsidiaries
Cost
Additions
At 30 September 2020
Investments in subsidiaries are recorded at cost. Details of additions are provided in note 20.
The Group consists of the following subsidiary undertakings:
Company
Auction Midco Limited
(directly held) *
Auction Holdco Limited *
Country of
incorporation
United Kingdom Holding Company
Principal activity
United Kingdom Holding Company
Auction Bidco Limited *
United Kingdom Holding Company
ATG Media Holdings Limited * United Kingdom Holding Company
Proxibid UK Limited *
United Kingdom Provision of auction
trading software
Auction Fluency Limited *
United Kingdom Dormant
United Kingdom Holding Company
Auction Technology Group UK
Holdings Ltd *
ATG Nominees Limited *
Company
Number
12400881
12400986
12401140
06521301
09023475
0426274
06636047
Metropress Limited
United Kingdom Provision of auction
1010311
United Kingdom Employee benefit trust
09083365
Peddars Management
Limited *
Turner Topco Limited *
United Kingdom Dormant
07901998
100
trading software
United Kingdom Holding Company
08968154
08968359
Turner Bidco Limited *
United Kingdom Holding Company
Auction Technology Group
Germany GmbH
Proxibid Bidco Inc
Proxibid Inc
Germany
USA
USA
Auction Payment Network LLC USA
Bidspotter Inc.
ATG Media US Inc.
USA
USA
Provision of auction
trading software
Holding Company
Provision of auction
trading software
Provision of auction
trading software
Provision of auction
trading software
Holding Company
-
-
-
-
-
-
100
100
100
100
100
100
100
100
Company
£’000
112,503
112,503
Ownership
%
100
100
100
100
100
100
100
100
100
* Auction Midco Limited (Company number 12400881), Auction Holdco Limited (Company number 12400986), Auction Bidco
Limited (Company number 12401140), ATG Media Holdings Limited (Company number 06521301), Proxibid UK Limited
(Company number 09023475), Auction Fluency Ltd (Company number 04266274), Peddars Management Limited (Company
number 07901998), Auction Technology Group UK Holdings Ltd (Company number 06636047), Turner Topco Limited
(Company number 08968154) and Turner Bidco Limited (Company number 08968359) have taken advantage of Section 479A
of the Companies Act 2006 to not require an audit on the basis that they meet the necessary criteria, in particular that the
immediate parent undertaking has provided a guarantee concerning debts in the form prescribed by Section 479C. This
guarantee, together with a notice from the member agreeing to claim the exemption, will be filed at Companies House along
with these financial statements for Auction Topco Limited (Company number 12400807) , as the ultimate parent undertaking.
The registered office of all undertakings incorporated in England is The Harlequin Building, 65 Southwark
Street, London, SE1 OHR. The registered office address of all undertakings incorporated in the USA is
1821 Dock Street, Suite 100, Tacoma, WA 98402. The registered office address of Auction Technology
Group Germany GmbH is Oberhafenkontor, Stadtdeich 27, 20097 Hamburg, Germany.
44
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
12. Leases
Nature of leasing activities (in the capacity as lessee)
The Group leases several assets including property, motor vehicles and computer equipment.
As at 30 September 2020, the Group held leases over three property one in the UK, one in the US and one
in Germany. The Company did not have any leased assets during the period ended 30 September 2020.
The US office is office is operated under a 6-year lease which began on 1 June 2017 with escalating fixed
lease payments over the term. In addition to base rent, this lease also requires variable payments for
common area building maintenance, insurance and taxes which have been determined to be non-lease
components and are not included in the measurement of right of use assets and lease liabilities.
The German office lease expires in July 2021 but includes an option to extend through to July 2027. The
Directors have concluded that it is reasonably certain that the Company will exercise its right to extend the
lease through July 2027 and have therefore accounted for the lease cost over this period.
The Group also leases computer equipment and motor vehicles. These leases comprise only fixed payments
over the lease terms. During the period ended 30 September 2020, Group leased a server and a printer.
The weighted average incremental borrowing rate contracted in 2020 was 4.24%.
Right of use assets
Group
Land and
buildings
leasehold
£’000
Computer
Equipment
Motor
vehicles
Total
£’000
£’000
£’000
Additions through business combinations
(note 20)
Depreciation charge for the period
At 30 September 2020
1,861
(342)
1,519
535
(138)
397
11
(3)
8
2,407
(483)
1,924
Lease liabilities
Group
Additions through business combinations
(note 20)
Interest charge for the period (note 6)
Lease payments
Foreign exchange
At 30 September 2020
Current
Non-current
Land and
buildings
leasehold
£’000
1,886
57
(416)
11
1,538
Computer
equipment
Motor
vehicles
Total
£’000
£’000
£’000
545
13
(149)
11
420
20
1
(15)
-
6
2,451
71
(580)
22
1,964
756
1,208
45
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
12.
Leases (continued)
Maturity analysis for lease liabilities
Non-cancellable lease rentals are payable as follows:
Up to 3 months
Between 3 and 12 months
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
At 30 September 2020
Group
£’000
189
1,027
1,131
483
36
2,866
At 30 September 2020, there was £nil of non-cancellable commitments relating to short-term leases. There
were no low value lease commitments.
13. Trade and other receivables
Current
Trade receivables
Less: Loss provision
Amounts due from subsidiaries
Other debtors and prepayments
Contract assets
At 30 September 2020
Trade and other receivables due within a year
Non-current
Amounts due from subsidiaries
Other debtors and prepayments
At 30 September 2020
Group
£’000
Company
£’000
7,374
(458)
6,916
-
953
784
1,737
8,653
-
88
88
-
-
-
200,549
57
-
200,606
200,606
4,822
-
4,822
At a Company level there was a £200,549,000 intercompany debtor included within current trade and other
receivables which is repayable on demand, with no interest accruing on this instrument.
There is also a £4,822,000 intercompany debtor owed to the Company by Auction Midco Limited, this facility
is repayable on 12 February 2030 and accrues at a rate of 12% annually.
46
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
13. Trade and other receivables (continued)
The Group applies the IFRS 9 Simplified Approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables and contract assets. To measure expected credit losses
on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and
aging. The contract assets have similar risk characteristics to the trade receivables for similar types of
contracts.
The expected loss rates are based on the Group’s historical credit losses experienced over the nine months
prior to the period end. The historical loss rates are then adjusted for current and forward-looking information
on macroeconomic factors affecting the Group’s customers.
The average credit period on sales is 30 days after the invoice has been issued. No interest is charged on
outstanding trade receivables.
The Group has identified that the risk affecting A&A debtors is different to those affecting the I&C debtors,
as they are exposed to different macroeconomic factors in the countries where the Group operates.
At 30 September 2020 there were no customers who owed in excess of 10% of the total trade debtor balance.
Trade receivables – days past due as at 30 September 2020
Group
Not past
due
<30
31 – 60
61 – 90
91+
Total
£’000
£’000
£’000
£’000
£’000
£’000
Expected credit loss rate
Gross carrying amount
Loss provision
1.42%
2.85%
8.57%
9.77% 100.00%
4,517
1,578
64
45
805
69
215
21
259
259
7,374
458
Movements in the impairment allowance for trade receivables and contract assets are as follows:
At incorporation
Expected credit loss provision included within the fair value of trade
and other receivables arising from business combinations (note 20)
Unused amounts reversed
At 30 September 2020
Group
£’000
Company
£’000
-
560
(102)
458
-
-
-
-
The carrying amount of trade and other receivables approximates to their fair value. The total amount of
trade receivables that were past due but not impaired were £930,000.
47
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
14. Trade and other payables
Current
Trade payables
Corporation tax
Other taxes and social security
Amounts payable to subsidiaries
Deferred consideration payable (note 20)
Accruals and contract liabilities
At 30 September 2020
Non-current
Deferred consideration payable (note 20)
Corporation tax payable
At 30 September 2020
Group
£’000
Company
£’000
1,128
2,119
561
-
518
5,024
9,350
522
1,578
2,100
-
-
-
199,723
-
-
199,723
-
-
-
At a Company level there was a £199,723,000 intercompany payable included within current trade and other
payables which is repayable on demand, with no interest accruing on this instrument.
The carrying amount of trade and other payables classified as financial liabilities at amortised cost
approximates to their fair value.
15. Loans and borrowings
Current
Secured bank loan
Unsecured loan notes
At 30 September 2020
Non-current
Secured bank loan
Preference shares
Subordinated debt
Unsecured loan notes
Group
£’000
Company
£’000
789
370
1,159
77,754
125,414
9,947
329
213,444
-
-
-
-
125,414
414
-
125,828
At 30 September 2020
214,603
125,828
48
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
15.
Loans and borrowings (continued)
The movements in loans and borrowings during the period were as follows:
Arising on acquisition
Repayment of loans
Proceeds from loans
Accrued interest
Repayment of interest
Foreign exchange movements
At 30 September 2020
The currency profile of the Group's loans and borrowings is as follows:
Group
£’000
Company
£’000
8,479
(2,697)
197,947
13,676
(3,186)
384
214,603
-
116,925
8,903
-
-
125,828
GBP
USD
At 30 September 2020
Below is the weighted average interest charge per period:
Secured bank loans
Unsecured loan notes
Subordinated loan note
Preference share
Secured bank loans
Group
£’000
146,456
68,147
214,603
Company
£’000
125,818
-
125,818
Group
At 30 September
2020
£’000
6.09%
12.00%
12.00%
12.00%
Company
At 30 September
2020
£’000
6.09%
12.00%
-
12.00%
The secured bank loans are denominated in GBP, USD and EUR. Loan repayments commence on 11 July
2020 with the amount outstanding being repayable on 11 July 2021. The loan is secured by a floating charge
over certain of the Group’s assets such as the Trademarks, and shares in the subsidiary companies. The
loan carries interest rate at a rate between 4-4.5 per cent above 3-month LIBOR. The interest is repayable
on a quarterly basis.
a) Senior Term Loan 1
On 10 February 2020, the Company entered into a Senior Term loan agreement with Crescent Capital
Group for a facility of GBP£23,070,483. The loan principal is repayable as a bullet repayment on 10
February 2027. Interest accrues daily at a rate of LIBOR +6.5% and is payable in quarterly
instalments.
49
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
15.
Loans and borrowings (continued)
b) Senior Term Loan 2
On 10 February 2020, the Auction Bidco Limited entered into a Senior Term loan agreement with
Crescent Capital Group for a facility of US $73,840,430. The loan principal is repayable as a bullet
repayment on 10 February 2027. Interest accrues daily at a rate of EURIBOR +6.5% and is payable
in quarterly instalments.
Subordinated loan note
On 13 February 2020, Auction MidCo Limited entered into a subordinated debt facility for US $13,000,000.
The loan is repayable as a bullet repayment on 13 February 2027. Interest accrues daily at a rate of 12%.
On 13 February 2020, a £385,000 unsecured, subordinated loan note facility was entered into at a
fixed rate of 12%. The interest on the loan is repayable annually. The principal is repayable in a bullet
repayment on 13 February 2027.
Preference shares
On 13 February 2020, Auction Topco Limited issued £117,002,000 of preference shares with a
nominal value of £1 per preference share. The issue of the preference shares was to partially finance
the acquisition of Turner Topco Limited and its subsidiaries.
The preference shares are subject to a mandatory 12% dividend of the issue price of the preference
share. The dividend is payable out of available profits, in the event the Group does not have
distributable reserves, the Group will be unable to declare the payment of the preference dividends.
Notwithstanding this, the holder retains the right to the dividend until such time as the dividend is paid.
The preference shares do not carry any voting rights or conversion rights into ordinary share capital.
There is no repayment date, however in the event of an exit, the redeemable preference shares are
repayable in full plus accrued dividends payable.
50
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
16.
Financial instruments
In common with other businesses, the Group is exposed to risks that arise from its use of financial
instruments. This note describes the Group's objectives, policies and processes for managing those risks
and the methods used to measure them. The significant accounting policies regarding financial instruments
are disclosed in note 2.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as
follows:
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Loans and borrowings
Deferred consideration payable
Preference shares payable
Financial instruments by category
Group
£’000
Company
£’000
Assets as per balance sheet – at amortised cost
Trade and other receivables, excluding prepayments and non-financial
assets
Cash and cash equivalents
At 30 September 2020
8,143
14,193
22,336
205,428
-
205,428
Liabilities as per balance sheet – other financial liabilities measured at
amortised cost
Trade and other payables, excluding non-financial liabilities
Loans and borrowings
Preference shares
Deferred consideration payable
At 30 September 2020
6,152
89,189
125,414
1,040
221,795
199,723
414
125,414
-
325,551
Financial risk management
The Group's activities and the existence of the above financial instruments expose it to a variety of financial
risks.
The Board has overall responsibility for the determination of the Group’s risk management objectives and
policies. The overall objective of the Board is to set policies that seek to reduce ongoing risk as far as possible
without unduly affecting the Group's competitiveness and flexibility.
51
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
16.
Financial instruments (continued)
The Group is exposed to the following financial risks:
Liquidity risk
Credit risk
Foreign exchange risk
Interest rate risk
Credit risk
The Group’s exposure to credit risk arises from cash and cash equivalents, as well as outstanding
receivables (note 13).
The Group's cash and cash equivalents are all held on deposit with leading international banks and hence
the directors consider the credit risk associated with such balances to be low.
The Group provides credit to customers in the normal course of business. The amounts presented in the
Statement of Financial Position in relation to the Group’s trade receivables are presented net of loss
allowances. The Group measures loss allowances at an amount equal to the lifetime expected credit losses
(ECL’s) using both qualitative and quantitative information and analysis based on the Group’s historical
experience and forward-looking information. During the period there was a credit to the Consolidated
Statement of Comprehensive Income of £102,000 to decrease the loss allowance.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment
losses, represents the Group’s maximum exposure to credit risk.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the amount of funding required for
growth. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group manages its cash and borrowing requirements through preparation of annual cash flow forecasts
reflecting known commitments and anticipated projects in order to maximise interest income and minimize
interest expense, whilst ensuring that the Group has sufficient liquid resources to meet the operating needs
of the Group. Borrowing facilities are arranged as necessary to finance requirements.
The follow table shows the maturities of gross undiscounted contractual cash flows of financial liabilities:
Group
Loans and borrowings
Preference shares
Trade and other payables
Deferred consideration payable
Carrying
amount
£’000
Contractual
cash flows
£’000
89,189
125,414
6,152
1,040
221,795
91,845
125,414
6,152
1,040
224,451
<1 year
£’000
1,159
-
6,152
518
7,829
1-5 years 5 years and
over
£’000
£’000
-
-
-
522
522
90,686
125,414
-
-
216,100
52
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
16.
Financial instruments (continued)
Company
Trade and other payables
Loans and Borrowings
Preference shares
Foreign exchange risk
Carrying
amount
£’000
Contractual
cash flows
£’000
<1 year
£’000
1-5 years 5 years and
over
£’000
£’000
199,723
414
125,414
325,551
199,723
414
125,414
325,551
-
-
-
-
-
-
-
-
199,723
414
125,414
325,551
Foreign exchange risk is the risk that movements in exchange rates affect the profitability of the business.
The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in their local
functional currency (primarily Pound Sterling, Euro or US Dollars) with the cash generated from their own
operations in that currency.
The Group earns revenue and incurs costs in local currencies and is able to manage foreign exchange risk
by matching the currency in which revenue is generated and expenses are incurred.
The majority of the Group’s financial assets are held in Pound Sterling but movements in the exchange rate
of the Euro and the US Dollar against Sterling have an impact on both the result for the period and equity.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end
of the period were as follows:
Net foreign currency financial assets/(liabilities)
US Dollars
Euros
Group
Company
At 30 September
2020
At 30 September
2020
(57,867)
1,673
-
-
The effect of a 5% strengthening of the US Dollar against the Pound Sterling at the reporting date on the US
Dollar-denominated net financial liabilities carried at that date would, all other variables held constant, have
resulted in an increase in loss for the year and increase net liabilities of £3,450,000. The effect of a 5%
strengthening in the exchange rate would also result in an increase to the Foreign Exchange Reserve of
£438,000. A weakening in the exchange rate would, on the same basis, have reduced the loss for the period
and decreased net liabilities by £3,203,000. The effect of a 5% weakening in the exchange rate would also
result in a decrease to the Foreign Exchange Reserve of £396,000.
53
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
16.
Financial instruments (continued)
The effect of a 5% strengthening of the Euro against the Pound Sterling at the reporting date on the Euro
denominated net financial liabilities carried at that date would, all other variables held constant, have resulted
in an increase in loss for the period and increase net liabilities of £29,000. The effect of a 5% strengthening
in the exchange rate would also result in an increase to the Foreign Exchange Reserve of £56,000. A
weakening in the exchange rate would, on the same basis, have reduced the loss for the period and
decreased net liabilities by £32,000. The effect of a 5% weakening in the exchange rate would also result in
a decrease to the Foreign Exchange Reserve of £51,000.
Interest rate risk
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and
floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed
and floating rate borrowings.
The sensitivity analyses below have been determined based on the exposure to interest rates. For floating
rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the reporting date was
outstanding for the whole period. A 100bps (1%) increase or decrease is used when reporting interest rate
risk internally to key management personnel and represents management’s assessment of the reasonably
possible change in interest rates.
If interest rates had been 100bps (1%) higher/lower and all other variables were held constant, the Group’s
profit for the period ended 30 September 2020 would have no impact.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern and to maintain an optimal capital structure which provides an adequate return to shareholders.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure
and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce
debt.
54
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
17. Deferred taxation
The deferred tax balance comprises:
Deferred tax arising on
Accelerated capital allowances
Other temporary differences
Acquired goodwill
Unutilised losses
Fair value movements arising on acquisition
Lease liability
Right of use asset
At 30 September 2020
Group
£’000
Company
£’000
89
369
(65)
2,118
(14,116)
223
(206)
(11,588)
-
-
-
-
-
-
-
-
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
A deferred tax asset has not been recognised for the following:
Unused tax losses
At 30 September 2020
Group
£’000
3,210
3,210
Company
£’000
-
-
At the reporting date, the Group has unused tax losses of £11,560,000 available for offset against future
profits. A deferred tax asset has been recognised in respect of £9,820,000 of such losses. No deferred tax
asset has been recognised in respect of the remaining £1,740,000 as it is not considered probable that
there will be future taxable profits available to offset these particular tax losses. The losses may be carried
forward indefinitely. The UK Budget on 3 March 2021 announced an increase in the UK corporation tax
rate from 19% to 25% with effect from 1 April 2023. The effect of the rate increase is not reflected in the
Condensed Consolidated Interim Financial Statements as it was not substantively enacted at the balance
sheet date. If the rate increase had been substantively enacted at the balance sheet date an additional
£2,559,000 UK deferred tax asset would be recognised, resulting in an increase of £818,000 in the tax
credit for the period.
The movement on the deferred tax asset during the period is as follows:
At 13 January 2020
Arising on acquisition of subsidiaries (note 20)
Charge to profit or loss
At 30 September 2020
55
Group
£’000
-
(16,353)
4,765
(11,588)
Company
£’000
-
-
-
-
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
18. Share capital
Issued, authorised and fully paid
900,364 A ordinary share of 1p each
152,348 B ordinary shares of 1p each
Company
At 30 September
2020
£’000
9
2
11
Shares issued in 2020
On 13 February 2020, the Company issued 900,364 A ordinary shares of 1p each for £1,
raising proceeds of £900,364, and 116,675 B ordinary shares of 1p each for £1.60, raising
proceeds of £186,680.
On 30 September 2020, the Company issued 35,674 B ordinary shares of 1p each for £1.60,
raising proceeds of £57,079.
Both A and B Ordinary shares rank pari passu and entitle the holder of the share to one vote per
ordinary share. The A and B Ordinary shares entitle the holders to a dividend based on a set amount
per ordinary share.
19. Reserves
Share capital
Share capital represents the nominal value of share capital subscribed for.
Share premium
The share premium account is used to record the aggregate amount or value of premiums paid when
the Company’s shares are issued at a premium, net of associated share issue costs.
Own shares held
Own shares held represents the cost of Company shares held by the Group’s Employee Benefit
Trusts.
Share-based payments reserve
Share option reserve represents the reserve for the shares options issued to key management
personnel.
Foreign exchange reserve
The foreign exchange reserve represents exchange differences which arise on consolidation from the
translation of the financial statements of foreign subsidiaries.
Accumulated losses
The retained earnings/accumulated losses reserve represents cumulative net gains and losses not
recognised elsewhere.
56
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
20.
Business combinations
Acquisition of Turner Topco Limited (‘TTL’)
On 13 February 2020, Auction Bidco Limited acquired the entire share capital of TTL for £150,101,000
and also incurred transaction costs of £4,175,000.
The purpose of the acquisition was a part of the Group’s reorganisation which involved investment by
TA Associates and a new private equity corporate structure added to the Group.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
goodwill are as follows:
Property, plant and equipment
Intangibles - Brand
Intangibles - Technology assets
Intangibles - Customer relationships
Right of use asset
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Lease liabilities
Deferred taxation liability
Contingent consideration
Net assets on acquisition
Consideration paid
Settled as:
Cash consideration
Issuance of preference shares
Debt amounts settled
Goodwill (note 9)
Net cashflow arising on acquisition
Cash consideration
Debt amounts settled
Less: cash and cash equivalents acquired
At fair value
£’000
134
6,065
7,972
42,923
1,397
4,714
8,900
(4,827)
(1,397)
(10,993)
(1,844)
53,044
150,101
74,659
5,066
70,376
97,057
74,659
70,376
(8,900)
136,135
Goodwill arises as a result of the surplus of consideration over the fair value of the separately
identifiable assets acquired. The main reasons 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 the assembled workforce within the business
acquired.
57
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
20. Business combinations (continued)
Acquisition costs of £4,175,000 directly related to the business combination have been immediately
expensed to the statement of comprehensive income as part of administrative expenses and included
within Exceptional Items (note 5).
Between 13 February 2020 and 30 September 2020, Turner Topco Limited contributed £18,004,000
to Group revenues and a loss before tax of £23,165,000 for the period. If the acquisition had occurred
on 17 January 2020, Group revenue would have been £37,394,000 and Group un-audited loss after
tax would have been £15,227,000.
Acquisition of Proxibid Inc.
On 13 February 2020, the Company incorporated Proxibid Bidco Inc which acquired the entire share
capital of Proxibid Inc. for £45,810,000 and also incurred transaction costs of £2,941,000.
The purpose of the acquisition was to strengthen the Group’s Industrial & Commercial offering in the
USA.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
goodwill are as follows:
At fair value
£’000
440
5,218
9,991
11,506
1,010
2,599
750
(2,576)
(2,678)
(1,054)
(5,360)
(1,002)
18,844
45,810
26,966
45,810
(750)
45,060
Property, plant and equipment
Intangibles - Brand
Intangibles - Technology assets
Intangibles - Customer relationships
Right of use asset
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Bank loans acquired
Lease liabilities
Deferred taxation
Deferred Consideration
Net assets on acquisition
Consideration paid
Goodwill (note 9)
Net cashflow arising on acquisition
Cash consideration
Less: cash and cash equivalents acquired
58
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
20. Business combinations (continued)
Goodwill arises as a result of the surplus of consideration over the fair value of the separately
identifiable assets acquired. The main reasons leading to the recognition of goodwill is the future
economic benefits arising from assets which are not capable of being individually identified and
separately recognized, these include the value of the assembled workforce within the business
acquired. The consideration was all paid in cash, with no deferred or contingent consideration.
Acquisition costs of £2,941,000 directly related to the business combination have been immediately
expensed to the statement of comprehensive income as part of administrative expenses and included
within Exceptional Items (note 5).
Between 13 February 2020 and 30 September 2020, Proxibid Inc. contributed £17,474,000 to Group
revenues and a profit before tax of £4,186,000 for the period. If the acquisition had occurred on 17
January 2020, Group revenue would have been £36,549,000 and Group un-audited loss after tax
would have been £16,047,000.
21. Notes supporting statement of cash flows
Included within net cash inflow of £14,193 is £2,697,000 of loan repayments, £86,088,000 of facility
loan drawdowns and the issue of preference shares of £111,859,000.
2020
Arising on
acquisition
Non-cash
Cash flow
Exchange
movements
30 September
2020
£’000
£’000
£’000
£’000
£’000
Cash at Bank
Preference
shares
Bank loans
Loan notes
Lease
Liabilities
9,650
9,650
(4,682)
(2,678)
(1,119)
(2,451)
-
-
4,575
4,575
(32)
(32)
14,193
14,193
(8,873)
(111,859)
-
(125,414)
(4,013)
(71,468)
(790)
(71)
(8737)
580
(384)
-
(22)
(406)
(78,543)
(10,646)
(1,964)
(216,567)
(10,930)
(13,747)
(191,484)
59
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
22.
Ultimate controlling party and related party transactions
In the opinion of the Directors the ultimate controlling party at the balance sheet date and date of report
was TA Associates. All transactions and balances with related parties, which are presented in the Group
and Company, are detailed below.
On 13 February 2020 preference shares of £86,401,000 were issued to funds advised by TA
Associates Management LP. Interest of £6,562,000 was payable during the period in relation to these
preference shares.
On 13 February 2020 preference shares of £26,093,000 were issued to funds advised by ECI
Partners LLP. Interest of £1,982,000 was payable during the period in relation to these preference
shares. On 13 February 2020 preference shares of £4,508,000 were issued to members of the
management team. Interest of £342,000 was payable during the period in relation to these preference
shares.
On 13 February 2020 a loan note of £385,000 was issued to a member of the management team.
Interest of £24,224 was payable during the period in relation to this loan note.
On 13 February 2020 a subordinated loan note of USD$13,000,000 (equivalent of £10,063,000) was
issued to funds held ECI Partners LLP and TA Associates Management LP. Interest of £759,000 was
payable during the period in relation to this loan note.
On 30 September 2020, Tom Hargreaves, a director of the Company received a loan of £7,000, the
full amount of the loan was outstanding at period end.
Balances and transactions between the Company and its subsidiaries, which are related parties, have
been eliminated on consolidation and are not disclosed in this note.
All related party transactions were performed at an arm’s length basis.
Details of remuneration of key management personnel can be found in note 7.
60
AUCTION TOPCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
23.
Events after the balance sheet date
On 16 October 2020, ATG Media US Inc. acquired 100% of the equity share capital of Auction Mobility
LLC for a total maximum consideration of $43,308,000 (equivalent to £33,350,000), comprising of
upfront cash consideration of $33,000,000 (equivalent to £25,424,000), deferred consideration of
$308,000 (£234,000) and contingent consideration of up to a maximum $10,000,000 (equivalent to
£7,692,000), subject to the performance of the acquired company against certain targets. The
directors have calculated the fair value of the contingent consideration expected to be paid, based on
a weighted average probability model, resulting in a liability of £3,918,000. The key inputs to model
were revenue growth assumptions and percentage probability weightings applied to forecast earn-out
cash flows based on the various scenarios modelled.
The purpose of the acquisition was to further strengthen the Group’s presence in the US.
At the date of acquisition, Auction Mobility LLC had net assets with a fair value of $13,683,000
(equivalent to £10,525,000). Details of the provisional fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Software
Customer relationships
Brand
Non-compete agreement
Trade receivables
Other debtors and prepayments
Cash and cash equivalents
Trade payables
Accruals and contract liabilities
Net assets on acquisition
Consideration paid
Settled as:
Cash consideration
Contingent consideration
Deferred consideration
Goodwill
At fair value
£’000
2,809
6,115
375
1,159
462
647
476
(129)
(1,389)
10,525
30,631
25,424
3,918
234
19,501
On 13 October 2020, a new secured borrowing facility was entered into with Macquarie and Sixth
Street for USD$33,500,000 (equivalent of £25,769,000). The loan carried an effective rate of interest
of EURIBOR+6.5% payable half yearly and is secured on the assets of the Group. The loan is was
repaid on 1 March 2021.
Auction Technology Group plc (which was incorporated and has become the holding company for the
Group following a reorganisation) applied to (i) the FCA for the Shares to be admitted to the premium listing
segment of the Official List of the FCA and (ii) the London Stock Exchange for all of the Shares to be
admitted to the London Stock Exchange's Main Market for listed securities ("Admission"). The Admission
become effective on 26 February 2021.
61