Sotheby's released its 2014 financial results and the results did not been Wall Street expectations. The Wall Street Journal and the Financial Times reported that earnings dropped 18.5% in the important fourth quarter due to higher expenses.
The Financial Times reported on the earnings
Source: Financial TimesSotheby’s earnings tumbled 18.5 per cent in the fourth quarter due to higher expenses, amid ongoing boardroom turmoil and the second public attack on the company from an activist investor in less than a year.
Shares fell by as much as 6.5 per cent in early trading on Monday after the auction house reported weaker-than-expected fourth-quarter earnings, taking a $7.5m charge related to the December announcement that chief executive Bill Ruprecht would be stepping down.
For the three months to the end of 2014, revenues rose a better-than-expected 3.5 per cent to $351.2m. Net income fell 18.5 per cent to $73.9m or $1.07 per share, compared with a year-earlier profit of $90.8m or $1.30 per share. The market had forecast sales of $338m and adjusted net income of $86.78m, or $1.28 a share. Total expenses grew 14.4 per cent to $222.2m.
Sotheby’s reported record worldwide consolidated sales of $6.7bn for 2014, and last month hosted an impressionist and modern art sale that brought in its highest ever total for any auction held in London.
“Given the backdrop of Russian instability and questions surrounding Chinese growth, we could have seen some hesitance and reticence — in fact we saw the total opposite,” remarked Mr Ruprecht.
“There continues to be strong demand and commitment to acquiring great works of art. We had a remarkable 2014, with double-digit sales growth in many of Sotheby’s key categories. These successes highlight the incredible depth and breadth of Sotheby’s expertise and demonstrate our ability to deliver for our stakeholders.”
However, the New York-based auction house continues to come under attack from some of its largest shareholders. The latest results came just 10 days after a fresh campaign on the New York-based auction house led by Marcato, a San Francisco-based fund with a 9.5 per cent stake.
In a scathing letter to the board, Marcato chief executive Mick McGuire called for Sotheby’s to repurchase $500m in stock, after the company made the decision to freeze capital returns to shareholders while it searches for its new chief executive.
Mr McGuire also accused the board of “wilful neglect” and demanded the resignation of chief financial officer Patrick McClymont, calling for a replacement who “will serve the interests of shareholders rather than defend the misguided policies of the past”.
He has been particularly vocal about the company’s “unusually large cash balance”, which he is demanding be reduced in order to unlock further investment opportunities and better value for shareholders. Mr McGuire has estimated that the company has $851m in excess capital.
Daniel Loeb, Sotheby’s largest shareholder with a 9.6 per cent stake, last year mounted a blistering public campaign against the company, accusing it of failing to understand the art market and calling it “an old master painting in desperate need of restoration”.
A truce was reached only after Mr Loeb, known for his attempts to shake up companies including Dow Chemical and Yahoo, was given a board seat last May. In December Mr Ruprecht said he would step down from the helm after a successor had been found.
Last week Mr McGuire underscored his efforts to bring about change in the face of what he termed “roadblocks to good governance” by filing a motion seeking un-redacted documents relating the company’s settlement with Mr Loeb and his fund Third Point.
Shares in Sotheby’s have fallen 7.8 per cent over the past 12 months. By close of trading in New York shares were down 1.4 per cent at $43.34.
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