- One is a household name and operates as a duopoly.
- The other is only known by customers in its niche market and by focused investors.
- One serves the luxury market.
- The other serves the industrial equipment market.
- One reported March quarter revenue down 58% Y/Y to $54 million and an operating loss of $50 million (excluding $6 million of restructuring costs, compared to an operating loss of $18 million).
- The other reported revenue up 3% Y/Y to $84 million and operating income of $28 million (+19% Y/Y) for the quarter.
- One has net debt position of $474 million and generated trailing twelve month cash flow from operations of negative $180 million and negative free cash flow of $202 million.
- The other has a net cash position of $129 million and generated trailing twelve month cash flow from operations of $128 million and negative free cash flow of $26 million (as a result of planned expansion capital expenditures).
- Luxury sales are down significantly and Sotheby's is reducing costs as fast as possible in an effort to conserve cash and, hopefully, service/repay debt. Sotheby's commented that the large revenue decrease was "primarily due to a 71% decline in net auction sales attributable to the downturn in the global economy and its impact on the international art market that began in September 2008." Results can be found here.
- Used industrial equipment sales are holding their own and Ritchie Bros. is not only seeing record auction results but still growing, albeit slightly. Ritchie noted that "The Company conducted 32 industrial auctions in nine countries throughout North America, Europe, the Middle East and Australia during the first quarter of 2009, and set three regional gross auction proceeds records." Results can be found here.
Ritchie Bros. Auctioneers was founded in 1963 and, at 12/31/08, operated from approximately 110 locations worldwide. Customers "include end-users of equipment, finance companies and banks, truck and equipment dealers, equipment rental companies, and manufacturers." We really like this high margin and high ROE business, which we see as more consistent than that of Sotheby's. We think Ritchie Bros. will also be around in 2044. However, after recovering from recent lows, the stock isn't cheap at 24 times trailing and forward EPS. We plan to keep watching RBA.
© 2009 Jeffrey Walkenhorst
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