SOTHEBY’S dependence on the contemporary art market could hardly be clearer than in their latest set of figures.
The company, who in 2007 took $1.34bn - a quarter of their
global sales total - for contemporary art, have seen almost their
entire first half results for 2008 skewed by shunting their big
summer London contemporary sales forward to the first two days of
July, meaning they will show up in the second half results
instead.
The results for the first half of 2008 also include a $350m
windfall from an oversubscribed offering to financial institutions.
It will be used, in the words of chief executive Bill Ruprecht, to
put Sotheby's in "an excellent position to be flexible and
competitive" - as well as to fund the acquisition of their York
Avenue premises and reduce debt.
Nevertheless, Sotheby's figures remain strong - the second
highest ever released, pointed out Mr Ruprecht as he unveiled an
aggregate auction total of $3bn for the first half of 2008.
The two London contemporary sales, which totalled just under
$200m hammer, generated around $32m in commissions. Had this been
included in the first half results, as usual, it would have meant a
3.7 per cent increase in revenues for the second quarter, instead
of the 5.7 per cent loss filed.
By the same token, the first half dip in revenue by 7.3 per cent
would have been cut to a mere one per cent.
Underlying trends do show an air of growing caution. Sotheby's
had already lowered the cap on the guarantees they would issue at
any one time from $500m to $350m and identified where savings could
be made in the event of a downturn.
"Our conservative approach to risk, the significant improvement
in our auction commission margins in the second quarter and our
focus on costs have all contributed to healthy profitability," said
Mr Ruprecht.
Lower operating costs and bonuses are the upside of lower sales
activity, and increased commissions have also boosted the figures,
though not to the level predicted.
A one-off benefit of $18.4m came from vendors failing to
exercise their commission certificates, issued as compensation in
the 2003 anti-trust case, before the May 2008 deadline.
Mr Ruprecht was also bolstered by the oversubscribed offer of
senior unsecured convertible notes - redeemable in 2013 and 2015
and on which interest at an annual rate of just over three per cent
is payable - that helped Sotheby's raise $350m to improve
liquidity. As well as funding the acquisition of their York Avenue
HQ, it means that they have already been able to pay off a $100m
bond, due in February 2009.
Headlining the next quarter is Damien Hirst's landmark London
sale, titled Beautiful Inside My Head Forever, which is
expected to take around $130m over two days in mid-September.
Assuming its success, and following on from the July
contemporary results, as well as the London Old Master sales,
Sotheby's "expect a stronger third quarter than last year".
By Ivan Macquisten
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