Welcome to the Slattery Asset Advisory
2nd Quarter Report for FY 15/16.

Welcome to the Slattery Asset Advisory report for the 2nd Quarter of 2015-16 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, insights and movements in asset values.

In this report we reflect on the final quarter of the 2015 calendar year and consider where we expect asset values to go in 2016.

We have included a special segment in this Quarterly Report on the impact on truck values from emissions regulation.

Slattery's proprietary owned hybrid traditional and online simulcast auction platform continues to grow in popularity. This has proved critical for keeping up values in struggling markets as our buyers are happy to purchase assets nationally increasing competitive tension at our auctions thereby increasing overall returns for our clients.

As always we have included some key trends in the report to give our valued clients a good idea of how we are tracking against the market.

Slattery Asset Advisory

Key Point Summary
  • Slattery Asset Advisory has been kept busy over the quarter all around the country.
  • A lot of work has been coming out of new lending and acquisitions in NSW reflecting very positively on the NSW economy.
  • We have had a spike in marine related activity from the downturn in mining to the positive new investment in aquaculture in Tasmania – covered in detail in the marine section below.

Slattery Asset Advisory had a very busy quarter, which continued through the Christmas and New Year period. Most of Slattery Asset Advisory's valuers worked through the Christmas period, which is quite unusual for the time of year.

The NSW team has been kept very busy with work originating from new lending in the banking and finance sector. The bulk of this has been within transport and the service and construction industry. We have also been kept quite busy undertaking large valuation programs as part of the due diligence on company acquisitions. This is a good sign for the health of the NSW economy.

In Victoria we have had a large amount of work coming from manufacturing and there has been an increase in insolvency related work. WA has been busy working with trucks and trailers.

Tim Deeble, our aviation expert, has also been kept very busy undertaking large fleet valuations of various aircraft all around the country.

Quarterly Sales Round Up

Mining and Earthmoving plant and equipment

Key Point Summary
  • Values for ultra class mining equipment have plateaued and we are no longer seeing the previously very large drops in asset values.
  • Slattery Auctions has been achieving sales in spite of the global glut of off highway dump tucks on the market.
  • Small and Mid-size assets used in civil construction have been selling very well through all of our auctions nationally.
  • NSW appears to be the strongest state for sales of mid-sized plant and equipment followed by Qld.
  • Prices in WA are softer with purchasers buying from the East Coast and shipping back.
  • Forklifts have been selling very well.

The market for mining and earthmoving equipment has not changed dramatically over the previous 6 months. The heavy more mining related equipment has unsurprisingly remained subdued whilst the smaller to medium sized equipment has been selling quite well.

Large mining assets

There is no real change in the market from the previous 6 months in the trends or asset prices for ultra-class mining equipment. The 'new base' for asset values has continued over the previous quarter and values appear to have plateaued. We don't believe values are continuing to drop at this stage.

Whilst values may have dropped from previous years, sales are still continuing as evidenced by Slattery Auctions' recent successful sale of a 2012 Caterpillar 777G.

An EOI process has been the most effective sales method for the later model large ultra-class mining equipment that still has an extended period of working life ahead of it. It is however critical to couple any EOI process with a highly proactive marketing campaign where our staff approach buyers directly. There is not enough demand in the market to wait for buyers to come to you.

In Western Australia and Queensland equipment used predominantly in mining continues to be parked up with very low utilization rates. The yards of rental companies supplying the mining sector in Perth are packed full as more assets come off contract. In Perth, many rental companies have exited leases early and are moving out of their premium premises to cheaper and more basic premises outside of Perth in an effort to reduce overheads. In Qld the downturn is very apparent in the mining towns of Central Qld and the Bowen Basin.

We expect to be very active in this sector over the next 6 months with a consolidation of rental companies responding to the reduced levels of demand.

Earthmoving equipments
"Whilst values may have dropped from previous years, sales are still continuing as evidenced by Slattery Auctions' recent successful sale of a 2012 Caterpillar 777G."

Small to mid-size used earthmoving equipment

Small to mid-sized plant and equipment with applications in civil construction sold well over the last quarter and we have seen stronger sales results across a range of asset categories. Whilst the hourly hire rates are not what they were in the midst of the mining boom, the astute operators are continually growing their fleet at a conservative rate in line with their increasing work demands.

NSW appears to be the strongest market nationally for plant and equipment with high levels of business confidence. Plant and equipment dealers are confirming this trend noting stronger trading conditions than in previous quarters. Consequently our auctions nationally are receiving strong NSW attendances and many NSW based buyers are purchasing plant and equipment around the country and transporting it back.

Qld is also reporting very strong selling conditions for smaller plant and equipment. Slattery Asset Advisory has been increasing valuations for small quality skid steer loaders with strong demand lifting values from 6 months ago.

In contrast, Victoria is reporting less than positive conditions with minimal Government projects in the pipeline and reluctance by contractors to make purchases without locking in a contract for the machine in advance. The highlights in the earthmoving sector in Victoria have been for late model equipment with low hours and excellent service histories. These machines are very popular with interstate buyers predominantly from NSW. Our truck and machinery auctions in December offered a late model 2013 21 tonne Sumitomo Excavator, which achieved $135,000 representing 105% of the retail figure.

The Western Australian market for plant and equipment has been understandably subdued. Equipment values have also been affected by the delays surrounding the Perth Freight Link Project extending Roe Hwy to the docks of Fremantle as well as the WA Gateway Project coming to a close. The difficulties with these projects have reduced demand for mid-sized plant and equipment. The trend of east coast buyers purchasing out of Perth and shipping back to the East Coast is continuing and maintaining base values in the WA market.

On a more positive note for the WA market there is still strong demand for small equipment machinery that is intended for local trade use. This includes skid steer loaders, excavators below 10 tonne and smaller tipper trucks. The demand seems strongest with rental hire companies who specialise in leasing out smaller equipment as small business operators and sole traders currently prefer to rent rather than buy new equipment.

Excavators up to 30 ton (especially zero swing) and up to 25 tonne dump trucks are still in solid demand in line with a moderate increase in civil projects in northern NSW and southeast Qld. A recent sale of a 2012 Hitachi ZX 200-3 out of our Brisbane auction, which sold for $110,000 (representing 85% of retail value), was shipped back to NSW to go straight to work. Another recent sale of a 2007 Ammann ASC 110 Padfoot Roller received very strong bidder among end users and was ultimately sold to a construction company for 86% of retail value.

With safety and maintenance on government funded construction sites paramount, operators are opting for the most modern and well-presented machines on the market.  We see the greatest demand for "work ready" units as opposed to a machine that will require some repairs prior to generating an income. 

Forklifts

Forklifts are often very easy to sell with a consistently strong demand for quality units. Slattery Auctions recently conducted a major a forklift sales program for an access and materials handling company servicing the mines in the Bowen basin.  We saw very strong demand for all of the smaller forklifts with the majority of units sold heading to Sydney and Melbourne. 

The smaller telehandlers had a reasonable level of demand however the larger units (10-18 ton capacity) received very limited interest.  These units would struggle to find a place in any civil application.  The majority of the interest on the larger units was from overseas and consequently we saw units sold to Europe and Singapore and one unit heading to PNG.

Earthmoving equipments
Pad Foot Roller
Assets Hours/Kms Price
Achieved
% of Retail State
Earthmoving and Mining Equipment
2013 Sumitomo SH210 LC-6 Excavator 1,229 hrs $135,000 105% VIC
1989 Bobcat 743 Skid Steer Loader 817 hrs $13,000 84% NSW
2007 Ammann ASC 110 Pad Foot Roller 2,701 hrs $47,500 86% NSW
2012 Hitachi ZX200-3 Excavator 2,174 hrs $116,000 90% QLD
2012 Kobelco SK135S Excavator 2,535 hrs $85,000 80% QLD
2012 Ammann ASC30 Pad Foot Roller 287 hrs $36,000 90% QLD
Case SV185 Skid Steer Loader 85 hrs $28,500 80% QLD
2013 John Deer Skid Steer Loader 959 hrs $31,635 98% WA

Road Transport

Key Point Summary
  • New heavy duty truck sales were down 7.5% in 2015. Volvo knocked Kenworth off the perch with the highest number of units sold in December 2015.
  • Sales are still strong in NSW and Victoria for late model, low kilometer quality assets.
  • Japanese Medium rigid trucks 4x2 are selling very well everywhere around the country.
  • Tippers and tipping trailers are selling exceptionally well in the eastern states.
  • A large supply of Elevated Work Platforms has impacted the days required to achieve a sale however the Slattery Auctions team have been achieving some excellent prices in spite of market conditions.
  • In this issue, we discuss the negative impact of EGR engines on values of Prime Movers in the secondary market.

Used truck sales – Heavy duty

New truck sales figures have ended the year with an overall increase in total sales. These figures however are skewed due to the record year for the light commercial van segment, which boosted the overall figure. Of concern is the heavy duty segment, which ended the 2015 calendar year down 7.5% on the 2014 calendar year (which in itself was down almost 4% on 2013). This is one the lowest levels recorded in the past decade according to industry figures. These low figures are despite the heavy discounting being undertaken by manufacturers suggesting that even lower prices are not enticing buyers.

Used Truck Sales

Interestingly, the hardest hit of the manufacturers was Kenworth, which has consistently been the market leader by some distance. Not only has Kenworth suffered lower sales but incredibly Volvo actually led the market in December 2015 selling 31 more heavy duty units than Kenworth.

Naturally the impact of heavily discounted new stock by manufacturers on the values of used stock is to push down prices as buyers weigh up the difference between buying a new verse used truck. This discounting coupled with an oversupply of prime movers in the secondary market has pushed down prices for both auction houses and used truck dealers alike.

Our Victorian team however have reported results that appear to buck the negative trends in other states having achieved very good results for late model prime movers that are accompanied by strong service histories. Buyers in the Victorian market appear to be more active than elsewhere resulting in stronger competition. This has also been reflected in our Perth auctions that have a high buyer participation rate from the eastern states.

As has been the case for the past 18 months buyers are avoiding older trucks with high kilometres. Whereas previously this trend affected trucks over 10-12 years, the past quarter has seen this trend stretch to trucks from 8 years or older. Our very strong Newcastle truck and machinery auction saw the sale of a 15 year old 2001 Volvo 460 FH12 in November of 2015 for $14,000 representing close to scrap value.

The downturn in prices for older trucks has continued for such an extended period that we no longer view this as a downward trend in values for older trucks but rather a resetting of the base value for older trucks.

Used Truck Sales

Another factor influencing the values of older trucks is the dim view taken by the market of the exhaust gas recirculation (EGR) engines. Buyers have been avoiding prime movers with EGR engines (circa 2008 – 2012 models) and we have seen older pre-EGR engine prime movers selling for more than the newer models. This affects predominantly North American manufactured prime movers. See our special segment on emissions and EGR engines below for more detail.

In an effort to address the emissions regulation Kenworth have now fitted a DAF motor to some of the lighter rated prime movers. This has not been received well by buyers and is clearly impacting on their sales.

The trend in popularity for the new European model prime movers has filtered through to the used market with our NSW auctions achieving some very good results for late model Volvo prime movers. A 2011 Volvo FH16 700 that was due for a major engine rebuild was sold direct to an end user for $95,000 and a 2008 Volvo 520 FH sold for $45,000.

Whilst QLD has traditionally supported the North American manufacturers such as Kenworth and Western Star, we have seen a strong trend towards the European manufacturers as operators seek a more economical unit and drivers seek a more ergonomically comfortable truck to drive.  This contrasts to Western Australia where the European trucks are yet to make a significant impact with a strong preference still for the North American trucks.

The issue of parts availability and after sales service that previously gave the North American manufacturers a competitive advantage have now been overcome by the Europeans and in some cases have surpassed the North American manufacturers. 

There has been no change in the demand for the higher rated heavy duty prime movers from the previous quarter. Demand is still very subdued and felt most acutely in Western Australia. Lighter rated prime movers used in line haul are still very much in demand.

Medium and lighter duty trucks

The Japanese manufacturers dominate the medium duty truck segment and make up the bulk of new truck sales. Isuzu has approximately 35% market share while Hino increased its share to over 30% for the first time.

Used Truck Sales

Similar to the previous quarter, all of our offices have reported unwavering demand for late model, low kilometre Japanese manufactured small to medium rigid trucks. The reliability, after sales service and residual value on resale of the Japanese makes continues to shine through in all the rigid categories making them exceptionally popular with buyers. Even with the introduction of some comparably sized Korean and Chinese manufactured trucks (offering a significant price discount), demand remains solely on the good quality Japanese makes.

Ex-government trucks have been particularly strong with end users (mostly tradespeople) being the major driver behind the increased competition and higher prices. Traditionally tradespeople are more willing to spend on their primary assets and we expect the low interest rates are also assisting to fund capital expenditure on new assets.

Evidencing this trend is a recent sale in our Newcastle auction to a plumber. Our buyer paid a good price of $19,000 in our December auction for a 2004 Mitsubishi Canter Dual Cab Tipper compared to an identical truck from the same vendor for just $14,000 6 months earlier. Slattery Asset Advisory has been revising our valuations upwards for these types of assets in the face of strong sales.

End users also fought over a 2008 Hino FD1J 4x2 Tilt Tray, which made $42,000 at our December Auction. Several dealers with strong reputations for knowing truck values were adamant prior to auction that this was only a $30,000 truck due to the trucks age, condition and relatively small size. They were blown out of the water by the competition.

Used Truck Sales
"All of our offices have reported unwavering demand for late model, low kilometre Japanese manufactured small to medium rigid trucks."

Tippers and tipping trailers

As reported in our most recent quarterly report, an increase in infrastructure projects in NSW has had a positive affect on the value of assets used in the civil construction segment. In road transport, this means an increase in demand for tippers and tipping trailers throughout all of our premises around the country but most notably in our Sydney and Newcastle premises.

We have seen an increase in consignments from civil contractors who are looking to update their fleets. The last quarter saw a threefold increase in volume of large tipping trucks and super dog trailers come through for auction in NSW with the majority coming from established contractors. It is important to note the age of the stock however with the majority of assets being older from the late 90's to early 2000 models.

While the older stock is being offloaded, many end users are looking to increase their capital expenditure buying the later model stock we have on offer. Stronger prices have been reported in all markets on the East Coast. New entrants into the market seem more willing to purchase better quality stock at the top end of the value spectrum than previous generations. We are unsure of why this is the case however we suspect low interest rates would largely be the cause.

Elevated Work Platforms (EWPs)

Elevated Work Platforms

EWPs have found it very tough over the previous 6 months with a large volume of EWPs in various sizes coming on to the market. The volume of assets coming on to the market is mainly due to the fleet reduction program by major electricity distributors (Ausgrid) as they outsource their equipment to fleet management companies as well as the liquidation of assets resulting from some high profile insolvency matters such as Force.

Not all of the news is negative however with some very strong individual results achieved through Slattery Auctions' premises around the country. Our Queensland office offered two 2013 MAN TGS 33.440 6X6 EWPs that sold for $440,000 representing close to full retail value for the assets. As part of this large liquidation Slattery Auctions' achieved a margin of 35% over the estimated auction value on 20% of the fleet by undertaking an expressions of interest program. Naturally those EWPs with longer periods remaining on their certification have achieved higher sales results.

Buyers tend to be very loyal to particular brands with the recent sales program suggesting the Palfinger manufactured units as the most popular with buyers.

The popularity of the Japanese manufactured medium rigid trucks (as discussed above) also meant that most EWPs that were out of certification sold for well above the auction realizable value as purchasers looked to scrap the out of certification EWP and operate the medium rigid truck separately.

Almost all EWPs sold around the country by Slattery Auctions have been to end users rather than dealers with demand coming predominantly from NSW and Victorian buyers.

Trailers

The performance in the trailer market over the last quarter has replicated the performance of the corresponding prime mover that tows them. The late model units still receive solid demand whilst the older trailers struggle.

The significant drop in demand for low loaders due to the large reduction in need to tow heavy assets has continued. In response, the major Australian manufactures of low loaders have heavily reduced the price for a new low loader in order to compete in an already saturated market. This has had a direct impact on the value of low loaders in the secondary market pushing values down.

There has been a similar drop in demand for bulk haulage assets heavily impacting the price of side tippers. Side tippers had possibly the most significant reduction in values over the 2015 year. The downturn in prices for iron ore and the decline in output of the Coal mines saw a major influx of surplus side tippers of every configuration.  Five years ago a near new trailer would achieve new price at auction as the waiting list from the top manufactures meant 12 months from order to delivery.  Now a near new side tipper by a respected manufacture will achieve around 30% of new price.

Drop deck trailers are in strong demand at the moment (due to the back end of harvest season) and the buying market is largely made up by the agri sector.

Our Victorian office offered some skel trailers over the past quarter used in the transport of containers. These trailers were offered out of an insolvency matter that saw the assets split between a number of auction houses. The 2 x 2013 Vawdrey Super Skel's offered through Slattery Auctions Melbourne premises achieved the highest results of any of the auction houses who had the opportunity to offer them representing almost 90% of the retail value.

Out of the box

Two of the more uncommon items through the auctions this past quarter in Newcastle that both had stellar results were a cattle truck and a high quality motor home.

The cattle truck achieved a very high price at auction. We suspect this high sales result achieved was due to the good fortunes of cattle producers who have been enjoying very high prices for cattle for an extended period.

We also offered a high quality, later model motor home, which achieved a phenomenal result for our vendor. The asset was a 2013 Iveco Daily Monte Carlo 72 Sunliner and sold for $151,000. The enquiries on the motor home were very strong and constant from the commencement of the advertising campaign. Some of the 'Grey Nomads' claimed to be keen to spend their kids' inheritance and competition was exceptionally strong. Several dealers of motor homes indicated that they would be very strong bidders in their attempts to purchase this asset however they were left behind in the early high bidding. The result represented full retail value for the asset.

Assets Kilometers Price
Achieved
% of
retail
State
Road Transport
2012 Freightliner Argosy 101" 346,058 km $125,000 90% VIC
2015 IVECO Eurocargo Tilt 26,210 km $152,000 90% VIC
2013 Iveco Daily Monte Carlo 72 Mobile Home Synliner 31,071 km $151,000 94% NSW
2007 J Smith & Sons JSST2-20 Dual Axle Dolly NA $26,000 100% NSW
2011 Chriss Body Builders CBBDT-3 Super Dog Tipper NA $42,500 89% NSW
2013 MAN TGS 22.440 6x6 EWP Body: 2013 Palfinger WT450 45,000 km $470,000 120% QLD
2006 Isuzu FRR500 EWP Body: 2006 Tadano AT-255-1-90130 90,000 km $132,000 120% QLD
2013 Mitsubishi FV 500 6x4 Tray 45,000 km $120,000 90% QLD
2012 MAN 8x4 62m EWP 38,422 km $376,250 90% WA
2013 Hino 500 FD Tilt tray 65,372 km $82,022 86% WA

Emissions and Prime Movers

The Slattery Asset Advisory team has spent a lot of time in recent months talking our clients through the change in emissions standards and its impact on asset values. We have set out below a very brief overview of the current standards and the impact on used asset values in Australia.

Background

Emission standards in Australia have existed in various forms since the early 1970's. The first emissions standards affecting heavy diesel fuelled vehicles became effective in 1995 and have subsequently become more stringent. Domestic regulations commenced with the Euro 2 standards up to most recent and current standards in Australia, the Euro 5 standards for heavy-duty diesel engines, which were adopted in 2013.

The Euro standards are the acceptable limits for exhaust emissions of new vehicles sold in EU member states. This includes limits on the maximum permissible volumes of various emissions including, among others, nitrogen oxides, total hydrocarbon, non-methane hydrocarbons, carbon monoxide and particulate matter. Australia has been adopting these standards over time. 

There has been industry consultation and discussion papers occurring since 2013 on compliance with the considerably tougher Euro 6 standards, which have been in effect in Europe since January 1, 2014. According to the national heavy vehicle regulator there is no timeframe on the adoption of Euro 6 in Australia. Despite there being no requirement to comply with Euro 6, some larger operators in Australia have been operating Euro 6 compliant vehicles since November 2014.

Market reaction

European manufacturers of Prime Movers who evolved with the development of the emissions standards, have developed the necessary technology to deliver a powerful reliable engine that complies with emissions regulation.

The North American manufacturers however such as Kenworth and Western Star have been very late to adapt in comparison to their European counterparts. These manufacturers have traditionally fitted the American made CAT, Cummins or Detroit engines to Australian delivered trucks. These engines are powerful and fuel efficient but traditionally have not kept up with the emissions standards until forced to comply. In an attempt to address this issue, each engine manufacturer released their Exhaust Gas Recirculation (EGR) engine to comply.

The market response to EGR engines has been very negative. Generally mechanical issues and poorer engine performance has been cited as the main reason for the lack of confidence in the EGR engines.

A well maintained engine undertaking general line haul duties prior to the EGR models could be expected to travel between 1 million and 1.2 million kilometres before requiring a rebuild however we have heard anecdotal evidence the EGR engines were blowing anywhere from 200,000 – 600,000 kilometres repeatedly. The EGR issues are most prevalent in models from 2007 to 2009 making them currently very unpopular in the secondary market.

If you offered a 2007 Western Star 4800 prime mover fitted with a Pre EGR CAT C-15 engine against a 2008 Western Star 4800 prime mover fitted with C-15 Acert (EGR) engine (both with exactly the same kilometres and hours), the 2007 prime mover is likely to sell for over $10,000 more than the newer truck. 

The advent of diesel exhaust fluids as a fuel additive to reduce emissions (the best known is the German developed ad blue) has helped fill the gap between the American and European manufacturers.

Kenworth has also entered into an alliance with DAF and now releases its line haul and light duty trucks with a DAF motor. This is receiving major buyer resistance.   

Mack trucks, which is a part of the Volvo group now manufactures its trucks with Volvo developed compliant engines and is being received better.

In the domestic market, we have seen the North American makes continue to lose traction against the European makes of Volvo and Scania due to pricing, luxury and after sales service.  Whilst Kenworth is still the market leader in Australia selling more prime movers than any other manufacturer, people are now starting to question whether they still will in 5 years based on recent gains by the European manufacturers.

Used Truck Sales
Used Truck Sales

Motor Vehicles

Key Point Summary
  • 2015 was a record year with the highest number of cars sold ever. Mercedes Benz sold more units in 2015 than Ford.
  • SUVs continue to dominate with an increase in market share to 35% of the new car market. Their popularity is reflected in used car sales.
  • Slattery Auctions Sydney and Melbourne car auctions continue to dominate the auction industry consistently achieving very strong results.
  • Despite a large volume of used light commercial vehicles hitting the market in 2015 (circa 2500 units) values have remained steady and are expected to increase.
  • The business model of second hand car dealers is changing away from the car lots in the auto alleys to online business models operated out of large warehouses by major dealer groups.

New vehicle market

Much is changing in the Australian motor vehicle market with 2015 a year for new records. Australians bought 1,155,408 new vehicles in 2015 up 4% from 2014 and more than any other year. Australians also bought more Mercedes Benz vehicles (22,817 units) than Ford (19,817 units) with sales of Australian made vehicles across the board dropping substantially.

The trend towards luxury cars as well as SUVs is ongoing with increases in sales in both. Sales were up for new Ferrari, Maserati, Lamborghini, Aston Martin and Jaguar vehicles and sales for SUVs increased from 31.7% of all new cars sold to 35.4%.

Toyota was the highest selling of the manufacturers in 2015 and also took out the number 1 selling car for 2015, the Toyota Corolla.

Interestingly from a geographical perspective, sales of new vehicles fell almost 8% in Western Australia.

Used Car Sales
"We have seen an increase in many first time buyers and an increase of interstate buyer participation."

Secondary vehicle market

The trends in new vehicle sales have again been mirrored in the secondary car segment. Across the board sales results in our vehicle auctions were very strong with the standout segments being the commercial vehicles, SUVs and luxury vehicles. The limited supply of quality sedans with low kilometres and SUVs has led to aggressive competition for this prime retail stock.

Prestige and high-end vehicle sales have continued to sell well as per previous Quarterly Reports. The buying trend towards luxury marques has ensured that any used luxury vehicles that have come through our sales in all sites have achieved strong results around the country. Our Victorian premises is always a standout for prestige vehicles with a seemingly insatiable demand from buyers out of Melbourne.

The light commercial vehicles offered across the country have been selling with extremely high clearance rates and outstanding prices. Low mileage turbo diesel commercials are always in the greatest demand whilst in contrast the petrol models sell for substantially less. The winding up of the sales programs for the "Sargents" and "All States" fleets has cut off a large source of used light commercials hitting the market in the back end of 2015, which should mean the prices for light commercials remain strong into 2016.

Buyers have had a strong preference for Toyota manufactured vehicles through all of our auctions due to Toyota's reliability and durability. Toyota has dominated the secondary light commercial market in terms of sales results however our Victorian office has reported very strong results for a fleet of Mazda BT-50s, which all sold under the hammer.

Slattery Auctions' focus on developing and increasing our database of quality buyers has seen us capitalise on the strong market conditions. We have seen an increase in many first time buyers and an increase of interstate buyer participation. Online participation in the simulcast of our auctions has shown very strong growth with active online users up 28.5% on the same time last year. This is a very positive trend for vendors as buyers are happy to purchase sight unseen from Slattery Auctions and cover the transport costs of the vehicle back to their home state.

Changes in used car dealerships

Like most industries the internet has caused massive disruption and second hand car dealerships are no exception. The formerly busy "auto alleys" in any capital city are now left with empty lots waiting redevelopment as businesses adapt or disappear.

Buyer habits now see most buyers for used cars doing all their car research on the Internet before leaving home. Buyers have a fixed idea of what they want and where it is located making car shopping a much more targeted affair.

Large dealer groups now market their used vehicle trade-ins and vehicles bought at auction via digital marketing platforms and invite buyers to visit their warehouse. Perth has seen two of Australia's largest automotive groups diversify their business model by opening a fixed price 'warehouse style' dealership.

The impact has been to increase the competition in the secondary car market leading many used dealerships to replicate the business model in their new car dealerships. That is making very little margin on the sale of a vehicle and instead making a profit through the sale of finance, insurance, warranties and other ancillary products. This is good news for vendors via auction who are benefitting from the competition for good stock.

Used Car Sales
Used Car Sales
Assets Kilometres Price
Achieved
% of Retail State
Motor Vehicles
2012 Mazda CX-9 Classic 43,674 km $30,500 100% VIC
2013 Range Rover Sport SDV6 46,234 km $100,000 105% VIC
2007 Porsche 997 Convertible 70,112 km $68,000 95% VIC
2007 HSV GTS R8 49,156 km $27,500 131% NSW
2009 Lexus IS250 Prestige GSE2 134,142 km $18,250 100% NSW
2011 Hyundai iLoad TQ Van 21,033 km $22,250 100% NSW
2014 Audi Q5 2.0 TDI Quattro 8 12,115 km $75,000 127% QLD
2012 Isuzu D-Max LS (4x4) 39,940 km $30,750 108% QLD
2014 Hyundai i30 Active GD 12 231 km $15,200 121% WA
2015 Mitsubishi Outlander LS 34 km $34,500 100% WA

Marine

Key Point Summary
  • Values for commercial marine vessels have dropped like most industries with exposure to the mining sector. The value of these vessels are heavily affected by whether the vessel has a contract to service;
  • Older tugboats and barges require an extended sales period to achieve a sale;
  • There is positive news out of Tasmania with investment into new marine fleets used in aquaculture.
Marine
"Values for commercial marine vessels now are largely conneceted to whether a vessel has a contract to undertake work."

The final quarter of 2015 has seen Slattery Asset Advisory travel extensively to undertake a number of marine valuations of various types. The downturn in the mining sector has required valuations across Darwin, Onslow (3 hours south of Karratha) and South East Queensland whilst new investment in operator fleets have seen increased marine activity in North East Tasmania.

The commercial marine market has boomed off the north west coast of Australia over recent years however the market is now going through more challenging times as mining companies reduce spending. Contract work, charters for repair and maintenance, research and even recreation have all been affected. Values for commercial marine vessels now are largely conneceted to whether a vessel has a contract to undertake work.

Marine
Marine
Marine

Our Brisbane team has been quite busy working on a large matter involving a number of older tugboats and barges. These commercial marine vessels are not in high demand and generally require an extended sales period to make a sale.

The booming Salmon industry in Tasmania has seen investment in a number of new purpose built work vessels to cope with demand. Previously, older fishing trawlers have been retrofitted to cope with the increased workload, some of these have since been found to be inefficient and very tired given they can be 30 to 50 years old.

We have looked at a number of larger luxury private vessels for refinancing purposes over the quarter from fly bridge cruisers to engine propelled catamarans. We were also engaged to undertake the asset and invoice verification inspection of the 2 new Sydney Fast Ferry Catamarans for a major financier. Ocean Tracker and Ocean Wave are identical 24m aluminium wave piercing catamarans capable of transporting 260 passengers and 3 crew members between Manly and Circular Key in approx. 17 minutes. This is compared to approx. 38 minutes on the regular ferries.

Marine
Marine

Aviation

Key Point Summary
  • The exchange rate to the US dollar is one of the most significant factors affecting sales of aircraft in Australia.
  • As the Australia dollar has dropped against the US dollar, new aircraft sales have decreased and used aircraft values and sales have increased.
  • There has been a slight recovery in demand from overseas for Australian flight training schools.
  • Strong results for the sale of 3x Aquila aircraft by Slattery Auctions out of Jandikot in WA.

General Aviation

The largest factor influencing the value of aircraft in Australia is the value of the Australian Dollar. The fall in the Australian dollar has impacted the market by reducing imports across all categories of aviation and increasing demand for domestic aircraft, which have become more affordable.

The general aviation sector has maintained reasonable sales figures over the last quarter despite regulatory impacts requiring higher maintenance and consequently costs over the normally quiet holiday period.

"We foresee a similar drop in demand towards older Beechcraft models."

Beechcraft along with the Federal Aviation Administration (FAA) are in he process of developing a SIDs program similar to what Cessna introduced 5 years ago. This program will require Beechcraft owners to ensure inspections are completed on their aircraft at intervals on top of their current schedule of maintenance. Based on the impact the Cessna SIDs programs has had on owner costs, this will likely increase maintenance costs on Beechcraft aircraft by upwards of 20% per annum. Many general aviation operators have avoided Cessna aircraft as a result of this SIDs programs and we foresee a similar drop in demand towards older Beechcraft models.

Financiers with clients who own and/or operate Beechcraft aircraft should reach out to their clients to understand the impact of this on their business. Slattery Asset Advisory can assist to work through the challenges that this new requirement might bring.

Business jets

The business jet market has seen very few sales over the last quarter. One significant business jet provider on the east coast has entered administration with little sign of recovery. Based on their workload, this will have a minor effect on the sector with the potential for a new operator to enter or current operators to grow into the role.

Large passenger aircraft

Airline industry reports indicate a positive 2015 globally with 6.2% capacity growth and 1310 new aircraft deliveries. The capacity growth figures have been heavily influenced by the Asian markets as local airlines further expand from the established routes.

Middle Eastern and European low cost carriers have been the lead purchasers of new aircraft acquiring both narrow and wide body aircraft throughout 2015.

The Airbus A380 has suffered significantly during the last quarter of 2015 with a number of operators moving away from the model and towards Boeing built long haul and ultra long haul models.

Rotary aircraft

The helicopter market has seen little change in the last quarter with continued promise for a strong fire season during February. Operators have indicated little interest in investing further in their fleet or replacing machine until they see some increase in utility work whether it be floods or fires. As a result, helicopter sales both new and second hand are predicted to maintain their current trajectory.

Nick Jordan Asset Manager

Staff Profile

Nick Jordan

Asset Manager and Valuer

Nick has recently joined Slattery Asset Advisory and is a Valuer based in our Victorian office.

After completing his degree in 2014, Nick worked in Darwin for a small construction landscaping business in irrigation, landscaping and playscapes before returning to Melbourne to join the Slattery team. While studying he worked in the logistics division at Deakin University and as a trades assistant for a property developer. He has also held roles working for a harvesting contractor and was a machinery operator on properties in New South Wales.

Nick recently completed The Uniform Standards of Professional Appraisal Practice (USPAP) Introductory Course, ensuring he is trained and compliant with the recognised ethical and performance standards for the appraisal profession. He also holds a Bachelor of Property & Real Estate and is currently studying to obtain a Diploma of Building and Construction.

Nick answers a few important questions below:

What makes good customer service?

"I believe good customer service is about taking the time to listen, and strive to understand what it is your customer wants and needs. It is important to make sure that you go above and beyond your customer's expectations and ensure that you are considerate, respectful and accommodating to your client."

What sets Slattery's apart?

"The staff have strong customer service skills and a great reputation. They have a comprehensive knowledge of their field and there is a strong sense of team, a real shared responsibility for getting the job done."

What are your favorite pastimes?

"Movies, music, brewing beer, architecture and re-building old motorbikes into café racers."