Sotheby’s financial results for the second quarter and first half ended 30 June 2014 show a 15% fall in profit despite an increase in sales. The auction house said the decrease was due to increased expenses and a higher tax rate.
Adjusted net income for the second quarter of 2014 decreased 4% to $87.8 million, resulting in adjusted diluted earnings per share of $1.26, as compared to $1.33 per share in the prior year, largely due to the increase in Sotheby’s effective tax rate.
Net income for the second quarter decreased $14.1 million (15%), resulting in diluted earnings per share of $1.11.
“Second quarter net income was adversely impacted by after-tax special charges of $10.2 million,” said the auction house in a release.
Sotheby’s said that in the first half of 2014 adjusted expenses increased 4% to $301.8 million, due to higher salaries and related costs, consistent with prior guidance and the increased earnings for the period.
“These factors were partially offset by lower marketing and general and administrative expenses, reflecting management’s ongoing efforts to reduce costs in those areas,” said Sotheby’s.
“In the first half of 2014, total expenses increased 22% due to the cost of principal revenues attributable to a series of profitable transactions completed in the period ($32.0 million) and special charges ($24.3 million).”
In July, Sotheby’s announced a restructuring plan that will reallocate resources to collecting categories and regions with the highest potential for growth and to further reduce costs.
“We are engaging in this reallocation of staff and resources to achieve costs savings and to focus our resources and people on areas of the Company with the greatest growth opportunities,” said executive vice president and chief financial officer Patrick McClymont.
Sotheby’s chairman, president and chief executive officer Bill Ruprecht took a positive view of the results.
“Sotheby’s is seeing success across categories and around the world,” he said. “The number of buyers at all levels, the amount of property we were entrusted to sell, and the prices we achieved are all up significantly this year.
“We sold 487 lots at over $1 million, more than any other art market participant. We are demonstrating that the art market is robust and we’re serving new and existing clients who trust Sotheby’s to deliver superior expertise and market knowledge and attractive results.”
Bolstered by continued strength in the global art market and by excellent spring sales worldwide, Sotheby’s achieved a 42% increase in adjusted operating income and a 20% increase in operating income in the first half of 2014.
Sotheby’s net auction sales increased 24% to $2.7 billion on strong global sales during the period – particularly in Hong Kong and London – which led to an 18% increase in auction commission revenues to $403.8 million as compared to the prior year.
“The fact that 26% of our buyers in the first half of the year were first-time clients shows we are engaging with a new generation of collectors, and that’s exciting.
“We’re looking forward to building on the successes of these six months with a number of exceptional sales this fall and with our new eBay partnership that will showcase our New York auctions to an unrivaled global online audience of millions of potentially new collectors,” he added.