Tech gives an elixir of youth to some of the UK’s most venerable industries
Take a peek at the top ten holdings of almost any tech-friendly fund and you will almost certainly encounter a samey roster of largely US-based giants. For the more adventurous, smaller moonshot companies may beckon with promises of radical medical advances or disruptive widgets that may (or may not) forever change the way we live.
There is, however, a third way. The UK equity market may not be a hive of achingly cool new tech but it does offer some high-growth opportunities that are firmly tech-based. These are mainly mid-cap companies that are successfully upping their game by reaping the benefits of digitisation, e-commerce and the better knowledge of their customers that these provide.
Publishing for the 21st century
Take, for example, Future plc, a UK company that plies its trade in the decidedly old-school profession of magazine publishing. Its story is a great example of how a blend of technology, good management and knowing your customers can transmogrify a traditional business into a diversified, high-growth company.
Print magazines were declared to be one of the UK’s walking dead industries as early as the late 1990s. Today, magazine publishing remains very much alive and still growing, both in its printed, physical form and its online reincarnation.
Founded in 1985 with one publication (Amstrad Action), Future is no newbie to publishing. By acquiring a stable of market-leading hobbyist and leisure publications (including Yachting Monthly, Marie Claire and GamesRadar+) and building an online distribution platform, Future has created a business model that provides strong recurring subscription revenues. The data that Future collects about its customers enables it to cross-sell publications in a highly targeted way.
The company publishes more than 50 magazine titles in areas such as technology, films, music, photography, gaming, homes and knowledge. With its recent acquisition of GoCo plc (AKA Go Compare – the advert will be your earworm for the rest of today) the company now plans to diversify its products and income streams by offering financial products to its magazine subscribers.
Future first became a holding in the LF Canlife UK Equity Fund some years ago, since when we have watched it grow to its current £4.4bn valuation, which places it towards the upper end of the UK mid-cap market. We expect Future’s high growth to be sustained over the next 2-3 years and capable of taking its shares into the large cap index. The shares remain a high conviction mid-cap investment for the LF Canlife UK Equity Fund.
ATG - an auction bargain?
It is a truth universally acknowledged that Brits love an auction. Anyone who doubts this need look no further for corroboration than the wide choice of auction-related TV available to UK viewers.
Less well known is the fact that auction houses are pandemic winners. Tech in auction houses has traditionally been limited to uncomfortable chairs and a gavel but to survive covid, the UK’s auction houses went online. In the process, they discovered a new clientele, many of whom - after lengthy periods at home - had rediscovered their attics and had stuff to sell. The result was a 30% rise in auction sales during lockdown.
But something else is also afoot – the UK’s auction houses were going global even before the arrival of covid. Enter Auction Technology Group (ATG), a listed UK company that supplies and runs the technology to transform regional auction houses into global marketplaces. The company aims to generate powerful network effects, with auctioneers gaining access to a vastly larger pool of bidders and bidders having the opportunity to browse a global catalogue of auction wares.
Similar to Future plc, ATG is not a new company: it traces its roots to the very pre-internet Antiques Trade Gazette (1971) and cut its teeth in online bidding in 2006. Like Future, ATG has grown through organic investment and acquisition and benefits from an experienced management team. With a particularly strong presence in the UK, ATG is also a longstanding player in the US industrial and commercial auction markets.
ATG’s systems are currently used by 2,000 auction houses and bidders in 150 countries. As well as facilitating dealing in art, antiques and collectables, ATG also covers industrial machinery, construction and farm equipment and consumer surplus items (such as retail returns).
The company IPO’d in March 2021 and is currently valued at £1.5bn. We began to establish a toehold position in ATG in September 2021; the stock now accounts for approximately 0.75% of the LF Canlife UK Equity Fund.
Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. Currency fluctuations can also affect performance.
Due to the underlying assets held, the price of the LF Canlife UK Equity Fund is classed as having above average to high volatility.
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CLI01989 Expiry on 02/11/2022