This summary is based on the fourth quarter fiscal 2006 earnings call conducted by Ritchie Bros. Auctioneers Inc. (RBA: chart) on February 22, 2007.
Management:
CEO: Peter J Blake
CFO, COO and VP of Fin. & Internet Services: Robert Armstrong
President and President of US, Asia and Australia: Robert Mackay
Key Investor Issues:
- Quarterly net earnings per share decreased to 28 cents from last year quarter 41 cents.
- Q4 GAP was $739 million versus $683 million in the last year quarter.
- Q1 fiscal GAP is anticipated to be about $700 million.
- Long term average auction sales and EPS growth forecast to be 10% and 15% per year respectively.
Fiscal Year 2006 Financial Highlights
The net earnings in fiscal 2006 and 2005 included gains on sales of surplus property.
Excluding these items, which are not taken as part of the company’s normal operations, net earnings in 2006 would have been $56.2 million, or $1.61 per weighted average share. This would have represented a 14% increase compared with net earnings in fiscal 2005 of $49.5 million, or $1.43 per diluted weighted average share.
- The gains on sales of excess property contributed an additional $1.6 million ($1 million or, 3 cents per share after tax) in 2006 and $6.4 million ($4.1 million, or 11 cents per share after tax) in fiscal 2005.
- Total dividends paid during the year were $26.9 million, representing 47% of the net earnings. In January, the Board declared a quarterly cash dividend of 21 cents per share payable on March 16 to shareholders of record on February 23. The total outlay will be about $7.3 million.
The reported auction revenues were a record $261 million, representing a 23% increase from $213 million in fiscal 2005.
- The auction revenue rate was 9.59% in the current year versus 10.16% in the past year.
- Annual earnings in fiscal 2006 rose due to higher GAP, partially offset by a lower auction revenue rate and increased operating costs relative to the previous year.
- Gross auction sales per revenue producer were about $12 million and this was at a time when productivity was at a high level.
In fiscal 2006, a total of 177 industrial auctions were conducted in 13 countries covering North America, Europe, the Middle Ease, Africa, Asia and Australia.
- The company set 11 regional GAP records during 2006 and this includes the largest auction held in the company’s history in February 2006 at Orlando, Florida where GAP topped $113 million.
- The management also reported GAP of $130.2 million from the agricultural division in 2006 versus $76.4 million in the past year.
- The company held one auction in the year that focused mainly on real estate.
- The Canadian results in 2006 included GAP of about $130 million from the 141 unreserved agricultural auctions held during the year. This is in comparison to about $75 million GAP from 99 agricultural auctions in 2005.
The total number of bidders at industrial auctions was a record 241,132 versus 213,896 bidders in 2005.
- Of the total number of bidders 74,000 and 62,000 were successful in 2006 and 2005 respectively.
- The company handled more than 32,000 consignments, which totaled about 240,000 lots sold in the year.
- In the past year, the company handled 27,000 consignments and over 203,000 lots.
- During the year, the average industrial auction featured over 1,350 lots consigned by about 180 consignors.
- The average auction during the year attracted 1,360 bidders while the average GAP per industrial auction for the year was more than $14 million, versus $13 million in 2005.
- The average GAP per agricultural auction increase by 20% from last year’s to $900,000.
The company’s rbauctionBid-Live Internet bidding system performed excellently in 2006.
- More than 9,600 customers from 76 countries bought over $440 million worth of trucks, equipment and real estate. This represents an increase of 57% over the past year’s online GAP.
- A total of more than 57,000 customers from 150 countries are registered and have received approval to use the Internet bidding service.
- On average, Internet bidders represented about 24% of the total registered bidders at the 2006 industrial auctions, and they were the buyer or runner up bidder on 24% of lots offered online at the auctions.
- Since the launch of rbauctionBid-Live, the company has now sold in excess of $1 billion worth of trucks, equipment and other assets to online buyers.
- The service offers the best of both worlds for the sellers since the company is able to expose sellers’ trucks and equipment to the broadest possible bidding audiences.
The future sales and earnings growth will be under girded by the M07 initiative.
- The purpose of the initiative is to develop more efficient, consistent and scalable processes to facilitate achievement of growth objectives.
- During 2006, the company implemented a number of foundational modules of the Oracle enterprise resource planning system.
- The management is now deploying further phases of Oracle and the in-house developed operating system.
- M07 is targeted to become a mindset of continuous improvement across the company.
- An additional $3 million to $4 million G&A costs was recorded in connection to personnel working on the M07 initiative including the ERP implementation.
