Solid Sotheby's results point to healthy market

Hopes for a sustained improvement in the global art market have gained strength with the announcement of record earnings at Sotheby's. The company’s auction and related revenues were up 13 per cent to $502m last year, the highest in their history.

"2005 was our best year in 15 years and was, without question, one of Sotheby’s best years ever," commented Sotheby’s president Bill Ruprecht, who has relentlessly concentrated on the profit line, squeezing costs even if that means resisting the temptation to compete for market share.

Costs did rise in 2005, partly as a result of staging major single-owner sales, but profits were still up.

In 2004 Sotheby's made a spectacular leap back into profit, substantially aided by a $45m licence fee for their real estate business. If that one-off payment is excluded from the calculations, profits on Sotheby's normal business in 2005 were up 85 per cent, from $29m to $85m.

They attribute much of their improved performance to increased commission margins which rose from 16.4 per cent in 2004 to 18.7 per cent last year following an increase in buyer's premium in January 2005.

Commenting on last year’s results, Sotheby's European CEO Robin Woodhead reconfirmed the company's policy: "Of course, we look at market share but we are really focused on profitability." However, Sotheby’s will be concerned over their share of the market and must be acutely conscious that Christie’s streaked ahead last year, boosting their worldwide sales by 30 per cent to $3.2bn and posting some impressive sale totals.

Further comparison of the performance of the two global auction giants is difficult because Christie's, as a privately owned company, do not publish detailed accounts.

Taken together, the 2005 results do emphasise the health of the international art market and Robin Woodhead was encouraged to see a broadly based advance across many categories and global locations.

"Traditional categories have done well in London and New York but we are also delighted to see developing sales in other areas. For instance, the Asian market is up, the photographic market is up. Our Russian sales have increased tenfold in the last five years and wealthy Russians who were initially attracted to material from their homeland are now buying in other areas of the market."

In 2005 Sotheby's sold Canaletto’s Venice, the Grand Canal for $32.5m in London and David Smith's Cubi XXVIII for $23.8m in New York. Robin Woodhead pointed out that 2006 had already seen significant business done, with a record Old Master sale in New York and Sotheby's best ever Impressionist and Contemporary sales in London.

Commenting on the future of the Contemporary and Modern market, Robin Woodhead was in confident mood, stating that in the end he did not believe that the London and New York markets would diverge dramatically as a result of droit de suite.

"At the top end of the market the ?12,500 ceiling for droit de suite on any single work is not going to be a deciding factor. London is such an important centre and the market here is so strong, led by names names like Freud, Bacon and Caro, that ultimately I do not believe it will make a difference," he said.