Welcome to the Slattery Asset Advisory 2nd Quarter Report for 2015, which also rounds out the 2015 financial year. The Quarterly Report is read and valued by many of Slattery’s clients to keep ahead of the market for key industry trends and movements in asset values.
The team at Slattery’s has been very busy with a huge finish to the year. We wrapped up with a 30% increase in gross asset sales over the last year, a similar figure to the year prior.
We have also seen a significant uptake of Slattery Asset Advisory’s service offering, with many of our clients now seeking strategic asset management advice much earlier to ensure they are fully informed to make sound and confident decisions.
The big news from Slattery in the quarter was that we announced the opening of our new branch in Western Australia, headed up by industry veteran and Perth local Brian Mobbs. With decades of experience behind him, Brian is really enthusiastic to make a big impact in WA.
As always we have included some the key trends in the report to give our valued clients a good idea of how we are tracking against the market.
As all our clients are now aware, the first quarter of 2015 saw the unveiling of our new advisory service offering, Slattery Asset Advisory. Slattery Asset Advisory was created in response to the changing needs of our clients and to provide broader advice around valuations, transport, logistics and remarketing strategies before a company is forced into distressed circumstances. By undertaking more detailed analysis, without an agenda to achieve a specific outcome, our clients are able to make better informed commercial decisions based on all options available.
Some briefs in the second quarter of 2015 have been on behalf of large private companies with significant fleets looking to remarket their assets into overseas markets, as well as for some distressed files of large mining assets. We expect to see similar briefs over the coming quarter due to the uncertainty in the mining and mining services sectors.
Slattery Auctions has operated nationally for a number of years and has run many ad-hoc sales programs in Western Australia. We are pleased to now be in a position to put down strong roots in Perth and grow a strong business servicing the WA market from a permanent home with the official opening of a Perth branch.
Brian Mobbs, former WA and NSW state General Manager for the largest automotive auction house in the world, has come on board to head up Slattery’s WA operations. Brian is a great coup for our business, with a thorough understanding of the WA market and a strong commitment to an exceptional customer service culture that will ensure Slattery thrives in WA.
Our May auction was the first run by our Perth operations and was a great success due largely to our ability to run a national marketing campaign. By offering the assets via Slattery’s hybrid auction model – a traditional auction coupled with Slattery’s proprietary simulcast platform – we were able to live stream the auction over the internet to buyers from all over Australia.
We also received a lot of congratulations from buyers in attendance on the day who appreciated the integrity which underpins the Slattery way of doing business.
Sales achieved in WA to date have shown the importance of marketing the assets for sale nationally. We have experienced strong willingness from buyers at our auctions to buy out of WA and pay to transport the assets back to the east coast. We believe this trend will continue and is a positive for WA operators looking to downsize.
There’s a strong perception about significant drops in asset values for plant and equipment used in the mining sector, which has caused some panic among owners and financiers alike. Whilst it is true that the last 18 months to 2 years has seen large drops in the value of ultra class mining equipment (that is very large off-highway rock trucks, dozers, scrapers, shovels and excavators that are used predominantly in mining), it is important to have some context to the figures being bandied about.
Even as recently as 18 months ago, iron ore was trading at over US$125 a tonne and thermal coal at over $80 a tonne. It was during the heights of the mining boom that used equipment could sell for more than brand new prices due to the lead times in delivering brand new equipment. It is from these absolute levels that we have seen a significant drop in prices. In the same way that a coffee on St Georges Terrace, Perth hit as much as $6-7 for a coffee, they have now dropped back to $3-$4 a coffee, representing a 30% - 50% drop. We see these drops as more of a normalisation in values rather than a ‘bloodbath’.
To date we have seen a limited number of ultra-class mining assets hitting the market, suggesting there is not yet the flood of equipment that many are anticipating. Until such time as when there is an oversupply of ultra-class mining equipment being put to the market, which is not currently the case, we do not expect to see sale prices drop to concerning levels.
In most scenarios, particularly with older equipment, these ultra class assets remain at the mine site due to the cost and logistics involved in removing them. The assets are more likely to be used for parts should the need arise.
As the clear market leader in the manufacturing and sales of plant and equipment, Caterpillar’s sales figures are a useful indicator as to the health of the new equipment market. The second quarter showed a slow down in sales for Caterpillar with a drop in the Asia Pacific region of 22%. This was a further reduction from the first quarter of 2015 as previously reported.
A slow down in sales of construction and mining equipment was cited as the main reasons for the drop in overall sales in Asia Pacific, with reductions of 30% and 12% respectively. The biggest impact was felt in Asia suggesting the Australian market remained relatively resilient.
Values and the ease of sale for earthmoving assets and equipment used in the mining sector are very dependent on the size of the equipment and the ability for purchasers to use those assets in other sectors. Mid-size equipment that can be used in civil construction continues to sell for good prices. We noticed this particularly with 12 and 14 tonne rollers over the last quarter in Western Australia as well as some older rollers in Newcastle.
With the pipeline of federal infrastructure projects anticipated over the coming years we expect quality equipment with reasonable hours to continue to sell well.
Among excavators, the lighter excavators between 5 tonnes and 20 tonnes are selling very strongly. They continue to be in demand due to their applications across a broad range of industries. In contrast, the heavier rated excavators from 30 tonnes up to 60 tonnes have reduced in popularity and are proving more challenging for our machinery experts to place.
Articulated dump trucks have also been affected in recent times due to an oversupply on the market. Buyers are able to pick and choose, making for increased competition among vendors.
Surprisingly, demand for graders has dropped across the board and is being felt more acutely by non-Caterpillar brands. We will continue to watch this space to determine whether this was just an anomaly in the second quarter or something more long term.
Demand for dozers appears to be quite volatile at present. Our machinery managers have noticed a slight increase in demand for some of the larger dozers out of the eastern states. This is a positive sign for many machinery operators in WA who may be looking to offload some surplus fleet.
In Queensland, our machinery experts are reporting on the impact of the accelerated disposal program run by the Queensland government. The program involves the disposal of road maintenance equipment – including rollers and graders – and has dropped a surplus of equipment on to the secondary market.
With the cancellation of the East-West link project in Melbourne there does not appear to be any major infrastructure projects in Victoria. We expect this will result in limited or no increase in demand from the Victorian market.
|Assets||Hours||Price Achieved||% of Retail||State|
|Earthmoving and Mining Equipment|
|HYUNDAI ROBEX 290LC-7 EXCAVATOR||-||$28,000.00||80%||NSW|
|2000 HAMM 5011D SMOOTH DRUM ROLLER||2,883 hrs||$18,000.00||80%||NSW|
|INGERSOLL RAND SD-100D PRO-PAC SMOOTH DRUM ROLLER||5,887 hrs||$15,000.00||75%||NSW|
|2012 KOMATSU PC450 EXCAVATOR||2,936 hrs||$265,000.00||95%||QLD|
|2013 KOMATSU PC200 EXCAVATOR||1,668 hrs||$162,000.00||95%||QLD|
|2013 POWERSCREEN||898 hrs||$399,000.00||87%||QLD|
|2011 CASE 580ST BACKHOE||1,103 hrs||$63,000.00||87%||VIC|
|2011 TEREX PT50 POSI TRACK SKID STEER LOADER||286 hrs||$45,500.00||100%||VIC|
|2012 CASE CX135SR EXCAVATOR||2,403 hrs||$74,000.00||95%||VIC|
|2010 TEREX PT70 TRACKED SKID STEER LOADER||1,261 hrs||$36,000.00||85%||VIC|
As reported in our Quarterly Report on the first quarter of 2015, there was a very slow start to the year in new truck sales, which caused a lot of concern in the industry. This appears to have righted itself with a sharp increase in new heavy-duty truck sales at the end of last quarter, which has continued into the second quarter of the year. June saw twice as many heavy-duty trucks sold in total units sold than January. Kenworth has maintained its long standing hold on the greatest market share and Volvo has continued its ascendancy in growing its market share.
In the medium duty sector, Isuzu dominates as the market leader. Along with Hino and Fuso, the three brands have the lion’s share of the market in new medium duty truck sales.
Slattery Auctions Queensland has been an outstanding performer for truck sales, with our Queensland branch selling in excess of 200 prime movers and medium trucks in the first half of 2015 and over 500 trucks and trailers for the year. The vast majority were sold under the hammer without referral. Our auction in Coolum this year sold over 80 units in one sitting.
Our Queensland office is reporting that demand has dropped away significantly for more heavy duty spec’d trucks, that is, trucks with greater than 110 tonne GCM. The greater the specifications, the more challenging to sell at present. Trucks greater than 160 tonne are by far the least popular truck. This is a significant turnaround on previous years where it was very difficult to source these trucks.
The lesser rated trucks in the heavy-duty sector, 70 tonne GCM up to 90 tonne GCM B Double rated Prime Movers, are by far the most popular at present. These trucks are used primarily for linehaul operations up and down the east and west coasts. This market was flooded a few years ago and supply has since returned to normal. It’s currently very easy for Slattery to find buyers offering good prices for these assets.
The market for medium rigid and heavy rigid trucks is buoyant. There’s particular demand currently for Japanese makes, in contrast to the European makes, which are decidedly less popular. This is an interesting contrast to five years ago when it was easy to source Japanese makes.
The past financial year has firmly entrenched our Queensland team as the market leaders in the sale of trucks and trailers in the Queensland market.
Our new WA office has unsurprisingly reported that there is a large supply of road transport assets in Perth. Many operators are looking to offload surplus capacity in underutilised fleets.
The interesting aspect to our Perth sales is that most of our prime movers and side loaders have sold largely to east coast buyers. Slattery’s reputation for honesty and integrity is giving buyers the confidence to purchase remotely through our simulcast auction platform.
Side tippers were difficult to sell given the large volume recently sold into the market through a distressed sale. Side tippers are generally most popular with buyers in WA and Queensland only.
In the used road transport sector, the second quarter has seen the industry experiencing tough economic conditions, with several large transport companies being forced to close their doors. This has resulted in a large volume of prime movers in the marketplace, keeping supply up to the market and consequently moderating prices at auction. The highlights, however, have all been with late model, lower rated GCM (less than 90 tonne) prime movers with low kilometres making strong prices. We have witnessed a strong preference for bonneted prime movers through our Victorian auctions.
A highlight of the second quarter in Victoria was the offering of a fleet of 12 elevated work platforms (EWPs) into the marketplace for a major liquidation sale. The EWPs achieved 100% clearance and prices above and beyond our vendor’s expectations. This was a fantastic result based on the fact that the Victorian demand for EWPs is at record lows. In order to achieve strong results, Slattery’s targeted the national EWP market and drew in buyers from all over the country to ensure strong competitive bidding and strong returns for the vendor.
Conditions for truck sales in New South Wales have been similar to the Victorian market, with many buyers happy to buy through either our Melbourne, Sydney or Newcastle auctions. Slattery’s truck auction managers have reported a worsening in demand for older trucks (pre-2010) and felt it most acutely for offers on a 2006 Kenworth T950 6x4 prime mover offered in our May truck and machinery auction. Normally the Kenworth brand would ensure high demand however bidding was very passive. We will continue to be attentive to older prime movers to determine whether this is an ongoing trend.
NSW saw some solid results in the medium-sized commercial truck market over the past quarter. End users proved willing to pay well for good quality assets that could be put straight to work. Similar to Queensland, demand has been very strong for the Japanese makes. One example was an end user paying more than 80% of retail market value for a 1998 Isuzu FTR 850 Tipper. Despite the age of the truck, it was in terrific condition and the market saw this as good buying.
As reported in our last Quarterly Report, the Truck Industry Council expects the average truck age to exceed 14 years in the next 2 years. This is likely to make the much-publicised task of truck road safety remain an issue facing road regulators.
|Assets||Kilometres||Price Achieved||% of Retail||State|
|1998 ISUZU FTR 850 LONG 16' TIPPER||173,741 km||$33,000.00||83%||NSW|
|2007 HINO FD TABLE TOP||180,665 km||$35,000.00||74%||NSW|
|1998 INTERNATIONAL ACCO 2350G B/D TABLE TOP WITH CRANE||439,989 km||$27,000.00||80%||NSW|
|2010 KRUEGER TRI AXLE A TAUTLINER TRAILER - MODEL: ST-3-38||-||$24,000.00||71%||NSW|
|2011 MVP-RV NEW TOY HAULER IMPACT DUAL AXLE CARAVAN||-||$26,000.00||79%||NSW|
|2011 T609 DAY CAB||838,332 km||$125,000.00||84%||VIC|
|2010 MITSUBISHI FN64 TILT||276,000 km||$107,000.00||80%||VIC|
|2004 HINO FM EWP||94,630 km||$97,500.00||95%||VIC|
|2007 NISSAN UD PK245 4X2 FURNITURE PAN||165,190 km||$46,000.00||82%||VIC|
|2006 MISTIBISHI FIGHTER CHIPPER BODY||112,063 km||$38,000.00||84%||VIC|
|2010 KENWORTH K108||632,229 km||$133,000.00||90%||QLD|
|2009 MITSUBISHI FUSO||47,036 km||$48,500.00||85%||QLD|
|2011 FREIGHTLINER CORONADO PRIME MOVER||306,856 km||$120,400.00||75%||QLD|
|2011 ISUZU NPR 250 TRAY BACK||268,750 km||$25,200.00||90%||QLD|
|2003 ISUZU FVY CAB CHASSIS||404,880 km||$40,800.00||90%||QLD|
The second quarter saw continued growth in the new car market, despite a small decrease in May of 1.3%. Year to date new car sales are showing an increase of 3.2% on last year with a total of 670,735 motor vehicles sold. We expect these figures to continue throughout the year, largely due to new car affordability being at the best its ever been. According to CommSec, new car pricing coupled with capped price servicing and low interest rate finance has driven demand for new cars. As expected, as new cars become more affordable and prices reduce, it causes downward pressure in the used car segment.
The chief executive of the Federal Chamber of Automotive Industries noted the interesting evolution of consumer tastes when he highlighted that ten years ago, passenger cars represented over 60% of new car sales. Now, light commercial vehicles and SUVs represent over 50% of the new car market, whereas passenger cars represent only 45%.
Consumer tastes for the SUV has continued to grow with 13.4% more SUVs selling this July than July 2014. This has increased the SUV proportion of the market to 35% of all new cars sold. We are definitely seeing this trend reflected in purchasing habits in the used car segment.
The federal government’s $20,000 tax initiative saw a huge push in the entry level work vehicle market. Manufacturers struggled to keep up with demands for tool of trade type vehicle in this price range. However, we have not seen this demand translate significantly into the used car market.
Historically results for used vehicle sales are cyclical with better prices achieved in the warmer months leading into Christmas followed by a softening of prices post-Christmas as well as a lull in sale results over the winter months. Despite the traditionally lower prices over the winter months, auction prices for used vehicles remained steady across our national auctions. Prices remained strong through our very popular Sydney and Melbourne auctions.
The light commercial used car sector has seen an interesting period as the fleet of Sargents’ vehicles, a major vehicle rental company to the mining sector, has been liquidated over a number of months, increasing the supply of light commercials on the market.
Slattery has been offering light commercials and 4x4s for a major financier with the first vehicles that hit the market offering very strong returns for the vendor. The ability to maintain these results will rely on purchases by end users or, if the purchaser is a motor vehicle dealer, the dealer’s ability to resell the vehicles in volume. Slattery has managed to maintain its strong results for its vendors by being particularly responsive to the market and offering vehicles in the most appropriate location.
The volume of light commercials to hit the market has had an impact on prices on all dual cab light commercial vehicles across the board. The coming months will be worth watching with interest as most of the vehicles are Toyota Hiluxes, which traditionally have never been available in any sort of volume.
Our May auction in Perth achieved good results. We also ensured strong results by shipping some assets from a slightly depressed WA market to Sydney, where Slattery’s regular vehicle auctions achieved a premium on the Perth market.
As the number of sales channels and options increase for buyers of used motor vehicles so has the competition among vendors. In response, Slattery has placed a greater focus on buyer development through a national reengagement strategy, which saw our motor vehicle team engage personally with more than 2500 buyers around Australia. This strategy has been very successful, with a substantial increase in auction participation both in lane and online. Clearance rates were extremely high as a result of the competition and shortage of good stock. We also saw an increase in sales prices with many vehicles achieving more than 90% of the glasses retail figure.
|Assets||Kilometres||Price Achieved||% of Retail||State|
|2011 SUBARU LIBERTY||85,092 km||$18,250.00||100%||NSW|
|2013 HSV MALOO R8||14,287 km||$53,200.00||96%||NSW|
|2013 NISSAN PATROL ST-L||28,856 km||$46,750.00||92%||NSW|
|2012 NISSAN PATROL ST||53,002 km||$16,500.00||90%||NSW|
|2008 COLORADO LX||97,293 km||$16,500.00||91%||NSW|
|2011 VW GOLF GTD||48,612 km||$21,000.00||84%||VIC|
|2010 BMW X6||59,000 km||$51,000.00||82%||VIC|
|2010 TOYOTA HILUX||107,040 km||$24,000.00||80%||VIC|
|2012 KIA CRANIVAL||53,743 km||$29,000.00||78%||VIC|
|2012 FORD RANGER SPERCAB||115,810 km||$23,000.00||78%||VIC|
|2013 TOYOTA LANDCRUISER GXL TRAY||46,691 km||$57,500.00||95%||VIC|
|2014 TOYOTA PRADO KAKADU||19,052 km||$60,600.00||92%||QLD|
|2013 MAZDA CX9 LUXURY||19,042 km||$35,700.00||88%||QLD|
The aviation sector has begun to respond to the falling Australian dollar against the US dollar with a decline in new aircraft sales. The most noticeable decline in new aircraft sales has been in the general aviation segment of the market. Manufacturers have announced a 9% decrease in shipments, compared to the first half of 2014. Piston engine aircraft have been worst hit with a 12% fall in sales.
In contrast to the overall decrease in sales, the ever-popular Cessna Caravan has almost tripled its total sales with a 172% increase from the year prior. Mustangs have had a modest 20% increase.
The corporate aircraft sector will most likely benefit from the expansion of aeromedical service providers in the next quarter, which will likely lead to a bump in total sales results.
While the new aircraft sales have suffered, domestic sales of older aircraft have improved. This was evident in our recent aircraft auction held at Jandikot Airport in WA. Slattery Auctions offered three Aquila AT210A aircraft.
The Aquila is a German made composite aircraft that is quite popular in Europe, however less so in the Australian market due to perceived engine performance issues in the Australian heat. The Australian training market generally favours American made aircraft to European made aircraft.
Despite popularity concerns, all three aircraft sold very well to Melbourne based buyers with a 100% clearance rate.
Overall, we have seen movement in the flight-training sector with a recovery in demand from overseas students, most likely in response to the dropping Australian dollar. This will naturally increase the demand for training aircraft.
The fixed wing and turbine helicopter corporate charter sector, servicing the mining sector has been hit over the past 12 months with clients reducing expenditure in this area. Whilst this may impact on the values of larger corporate fixed wing aircraft, the single engine and multi-engine turbine helicopter market should receive some respite as the industry prepares for the fire season.
Two of the largest organisations in both maintenance and sales have become merged with Hawker Pacific’s purchase of Aeromil. As Aeromill was the primary dealer in Australia for Cessna’s full range of aircraft, including business jets, Hawker will now be the main dealer for Beechcraft, Cessna, Mahindra Aero, Diamond Aircraft and Bell helicopters. This adds to their nation wide maintenance, repair, overhaul departments, FBO service facilities and used aircraft sales.
|Assets||Airframe hours||Price Achieved||State|
|2013 AQUILA AT01-210A SINGLE ENGINE AIRCRAFT VH-OUI||1,237.3 hrs||$91,000.00||WA|
|2012 AQUILA AT01-210A SINGLE ENGINE AIRCRAFT VH-OIT||1,200.6 hrs||$90,000.00||WA|
|2012 AQUILA AT01-210A SINGLE ENGINE AIRCRAFT VH-OIS||1,249.3 hrs||$90,000.00||WA|
Brian is the General Manager of our new Western Australian branch based in Perth. He brings the Slattery Group invaluable experience from a long career in senior management. Most notably, he spent over 10 years as the State General Manager NSW & WA for a global auction house.
Brian moved to Perth in 2009 for two years, then after a short stint back in his native Sydney, realised that WA was his new home. He is looking forward to the challenge of building the new, multi-disciplined team and ensuring Slattery’s excellent service and reputation is replicated in WA.
Brian answers a few important questions below:
“Slattery is a true family business with a flat management structure. The directors of the business are very hands-on and always approachable”
“I am also very excited about the prospects of using Western Australia as the base to grow our presence throughout the Asia Pacific.”
“Listening, then acting is the essence of good client service. We must have empathy for our client’s situation and faithfully meet their needs”
“The fact that we are agents. With customers at both ends of the transaction, it gives the opportunity to satisfy two parties at once, which is very rewarding. Also, the competition and excitement of a physical auction can’t be beaten.”
“There are a few, but honesty would be the stand out quality. Honesty develops trust, which is the key to all sales transactions. I like to deal with people I can trust”
“Raising 7 kids with (most of) my sanity still intact”