Home Arts Sotheby’s UK profits dropped by almost a quarter last year amid ‘Brexit red tape’

Sotheby’s UK profits dropped by almost a quarter last year amid ‘Brexit red tape’

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Profits for Sotheby’s UK arm dropped 24% last year, falling from £34.5m in 2021 to £26.2m in 2022, according to its latest filing on Companies House made on 19 July. Auction turnover in the UK dropped by just 2% to £151m.

The accounts cite a number of risk factors to the health of the art market including the “overall strength and stability of the global economy” and Brexit. According to the filing, the import of art and antiques to the UK was down 18% in 2021 and a further 16% in 2022. Increased red tape from Brexit is “adversely affecting” Sotheby’s ability to move art between the UK and Europe, while additional taxes have had “a negative impact on the appeal of selling property in the UK”. The “amount and quality” of lots consigned for sale in London has also been “negatively affected”.

Nonetheless, the accounts note how Sotheby’s is a global company with the “appropriate systems” in place to operate worldwide and navigate regulatory changes. As a result, it has been a “smooth transition” to post-Brexit operations.

Sotheby’s declined to comment directly on the impact of Brexit on business, but a spokesperson says to interpret any of the risk factors included in the accounts “as an ‘explanation’ for any business operations is to misinterpret the purpose of their inclusion in the accounts”. Last year, sales in London were reportedly at their highest levels since 2018.

The ongoing war in Ukraine appears to have been less of a risk, having “not directly impacted the operations of the company”, according to the July filing. Russian clients represented less than 1% of global client activity in 2021 and 2022, while a small administrative office in Moscow was closed after the outbreak of war.

The accounts also show that Sotheby’s acquired an additional 50% in RM Classic Cars in February 2022, taking its shareholding to 75%. The investment was revalued at £46.8m. At the end of the year, there were four guarantees worth a combined £55.7m outstanding; in 2021 there was one guarantee for £46.2m. Meanwhile, there was a Foreign Exchange gain of £10m in 2022, likely a consequence of a weakened pound.

The Sotheby’s spokeswoman says the data provided on Companies House is “incomplete” and “based on a standalone entity which does not represent the financial view of our full global enterprise or even our UK business in aggregate”. Sotheby’s has 80 locations around the world and, as a private company, it does not have to publicly report its financial activity.

The spokeswoman adds that any statements included in the accounts “are not statements of personal opinion” by Patrick Drahi, the French-Israeli media and telecom entrepreneur and art collector whose company Bidfair USA bought Sotheby’s in June 2019.

The latest accounts for Sotheby’s parent company Bidfair, also owned by Drahi and also filed on 19 July, show a far greater drop in profits. As first reported in The Telegraph, profits for the group, which is based in Luxembourg, slumped by almost 75% in 2022, going from $318.4m in 2021 to $88.2m (£69m). Total operating income plunged from $359.7m to $126.5m. Sotheby’s declined to comment on the figures.

Bidfair USA bought Sotheby’s in a deal worth around $3.7bn in June 2019. Drahi then took the auction house private. Sotheby’s declined to disclose which other companies operate under the Bidfair umbrella, though the group’s accounts list multiple indirect subsidiaries including Bidfair USA, Sotheby’s offices in at least 40 locations, RM Auctions, Art Agency Partners and Sotheby’s Financial Services.

Bidfair’s only direct subsidiary, Sotheby’s Holdings UK, was incorporated in September 2020 after Drahi sold and leased back Sotheby’s New Bond Street headquarters via another company in a deal worth £230m.

After the sale, Sotheby’s passed a £100m dividend up a chain of businesses to Sotheby’s Holdings UK. Bidfair subsequently borrowed $450m from a French bank, secured against its shares in Sotheby’s Holdings UK. According to the latest accounts for the property company, also filed 19 July, Sotheby’s Holdings UK became a guarantor to Bidfair Property Holdings in the acquisition of a “New York property for a purchase price of around $100m”, likely to be the Whitney Museum’s Marcel Breuer building. The accounts say the building is expected to close in 2024.

Profits after tax at Sotheby’s Holdings UK were £29.1m last year compared with £42.1m in 2021. The directors for both Sotheby’s and Sotheby’s Holdings UK are Jean-Luc Berrebi and Sebastian Fahey. Jayne Louise Franks resigned from the latter in August 2022.

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