Sotheby’s on Thursday reported record fourth-quarter revenues of $263.1 million, a 28 percent increase over the prior period, primarily due to higher auction commission revenues and revenues from principal activities.
The company’s income from continuing operations for the fourth quarter of 2006 was a record $69.3 million compared to $51.7 million in the prior period, a 34 percent improvement, largely due to growth in auction commission revenues.
The results were partially offset by a $9 million, or 16 percent increase in salaries and related costs, due to higher full time salaries as well as higher incentive bonus costs attributable to the strong results for the period. Also, general and administrative expenses rose $11.2 million, or 38 percent, partially due to increased professional fees relating to an initiative for outsourcing catalogue production in Europe, outsourcing of professional tax services as well as consulting fees for strategic corporate initiatives.
In 2006, Sotheby’s, the parent company of Sotheby’s worldwide auction, private sales, dealer and art-related financing activities, achieved its highest annual total ever for revenues, operating income in its 263-year history. Total revenues in 2006 were $664.8 million which is $151.0 million, or 29 percent better than in 2005, largely due to a $109.9 million, or 25 percent, improvement in auction commission revenues. This is attributable to a 36 percent increase in auction sales (aggregate hammer price of property sold at auction, including buyer’s premium) which rose to $3.75 billion, Sotheby’s highest ever. Operating income of $197.2 million, was $73.9 million, or 60 percent ahead of the prior year. Income from continuing operations for the full year 2006 totaled $107.4 million, a $44.1 million, or 70 percent increase from the prior year. Adjusted EBITDA also dramatically improved by $73.2 million, or 51 percent, to $218.4 million.
These strong results are partially offset by a 21 percent rise in salaries and related costs mainly stemming from higher incentive bonus costs as a result of the strong financial performance for the year as well as increased full time salaries and stock compensation expense over the period. Also, general and administrative expenses increased by 20 percent partly due to a 33 percent increase in professional fees partially resulting from the catalogue outsourcing, tax outsourcing and consulting fees for strategic corporate initiatives mentioned previously.
“By virtually every measure, 2006 was Sotheby’s best year ever and 2007 is off to an outstanding start,” said Bill Ruprecht, Sotheby’s president and chief executive officer of Sotheby’s. “A 70 percent increase in income from continuing operations and a return on equity of 50 percent, along with the resumption of our dividend after a six-year hiatus, are clear indications of our continued improvement in profitability.”
Ruprecht added that in the spring Sotheby’s will launch “mySothebys,” which he calls “a major enhancement to our website that will revolutionize the auction experience for our clients.”
“It will enable clients to obtain 24/7 online services and account information and have access to exciting new features such as paddle pre-registration, instant magnification of lot images, a tracked lot list and immediate real time auction results,” he said. “Additionally, we will further build on our already sophisticated rich media experiences of video and podcasting by introducing streaming video of our evening sales this May. And we plan to take online real time bidding, which we introduced several years ago, to a whole new level of sophistication later this year.”