The FTSE Russell issues a quarterly report outlining the next shuffle of the FTSE indices. In its June report it tips Auction Technology Group (LSE:ATG), Moonpig Group, Renishaw, Trustpilot Group, Tyman and Volution Group (LSE:FAN) as potential additions to the FTSE 250 index. It also slates Royal Mail as the likely contender to replace Renishaw in the FTSE 100.
Curated auction leader
The Auction Technology Group is the world’s leading curated auction marketplace provider. Over 2,000 auction houses use its technology and £6bn worth of items are sold each year. It launched on the London Stock Exchange via an initial public offering (IPO) in February and its share price has soared.
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ATG supports existing auction houses by offering software, design and e-commerce solutions. It also runs the well-known auction sites i-bidder.com and BidSpotter. Furthermore, it has an antiques trade magazine and several additional marketplaces. I think the digital art craze for non-fungible tokens (NFTs) is renewing interest in auctions. Plus the stay-at-home economy has boosted revenues. In fact, group revenues rose 48% to £34.5m in the half year to the end of March.
The ATG share price is up 45% since IPO. The company has a £1.1bn market cap and, as mentioned, is now in the running to join the FTSE 250. There’s a risk the reopening could reduce interest, but with a clear shift to e-commerce I feel bullish on the sector. I’d happily buy shares in ATG today.
Another FTSE 250 contender is online review site, Trustpilot Group, was founded in Denmark in 2007 and launched via an IPO in March.
The Trustpilot share price has risen 20% since IPO and it now has a £1.3bn market cap.
It invests in its technology and big-data ecosystem to enhance ease of use for both users and clients. The site mission is to be open and collaborative, and it’s popular with consumers for providing unbiased website reviews It removed 2.2m fake reviews last year). The company makes money from paid products and services. The hook for businesses is they get an element of marketing and enhanced credibility for the business.
Keeping on top of fake reviews and ensuring a high level of trust is key for its ongoing success. Nevertheless, I think this looks like a great business and I’d consider buying Trustpilot shares, FTSE 250 member or not.
Ventilation specialist Volution Group operates internationally. It sells its extractor fans and installations to consumers and businesses. The UK accounts for half its business, with Europe and Australia making up the rest.
Following the M&A roadmap to scale is a clear priority for Volution. For now, it sees many opportunities in the UK and Continental Europe, but doesn’t rule out considering North American prospects in the future.
So far, it’s financed its deals from its own cash generation. But it has noted it may move into issuing equity for future acquisitions. This could lead to share price dilution, so I imagine market reaction would depend on the quality and size of acquisition.
Commodity pricing pressures are another issue that could cause share price volatility for the group. Nevertheless, I like the outlook for this business. After the pandemic, demand for ventilation appears to be rising. It’s the same new territories as climate change raises temperatures. I’d consider adding Volution Group shares to my Stocks and Shares ISA.