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Announcing their first quarter results just as the latest round of Impressionist and Modern sales in New York reinforced the continuing gloomy picture, chief executive Bill Ruprecht said Sotheby’s had adopted an “aggressive response” to the fall-off in business, with costs down 25 per cent and margins up 41 per cent.

Cuts in staff, salaries, pension contributions – even the introduction of enforced unpaid time off – have been topped by a two-thirds reduction in the annual dividend rate to 20 cents a share.

Because sales are seasonal, the first quarter tends to be a loss-making period even in the good times, but comparisons with 2008 show that even here the news has not been reassuring.
Operating revenues are down 58 per cent year on year at $54.4m, with last year’s net loss of $12.4m for the quarter turning into a $34.5m loss this time around.

The silver lining is that less activity has meant lower operating costs, and with reductions in management costs and favourable currency fluctuations the picture is better than it otherwise would have been.

Having eschewed lots below $5000 to chase the bigger contemporary and modern art prizes during the good times, Mr Ruprecht and chairman Michael Sovern have made it clear to shareholders that they have no intention of changing course now. With as much as 25 per cent of all company revenues coming from this sector in the previous year, they are clearly gambling on an upturn in fortunes sooner rather than later.

In the short term, a further five per cent of staff will go, resulting in a total reduction of 20 per cent since last year. The slashed dividend will save another $27m, say the company, while other cuts and savings should result in an overall saving of $160m by the end of the year.

By Ivan Macquisten