In c8707 sent at 07:00e today, an error occurred in the first bullet
point under Q2 2008 Highlights. "$5.2 million as at June 30, 2007" should
have read "$5.2 billion as at June 30, 2007". Corrected copy follows:
Sprott Inc. announces second quarter 2008 results
Results highlighted by 14% growth in assets under management over Q1 2008
TORONTO, July 31 /CNW/ - Sprott Inc. (TSX:SII) ("Sprott"or the "Company") today announced its financial results for the three- and six-month periods ended June 30, 2008.
Q2 2008 Highlights
- Assets under management (AUM) increased to $7.7 billion, compared to
$6.8 billion as at March 31, 2008 and $5.2 billion as at June 30,
2007
- Total revenue was $39.5 million, an increase of $35.8 million from Q2
2007
- Net income was $11.4 million, or $0.08 per share, compared with a net
loss of $7.7 million in Q2 2007
- Completed $200 million IPO on the Toronto Stock Exchange via a
secondary public offering
- Declared a second quarter dividend of $0.025 per share on July 29,
2008
"The second quarter was highlighted by our successful initial public offering and continued solid growth in assets under management in the face of turbulent equity markets," said Eric Sprott, President and Chief Executive Officer. "The rise in assets reflects our strong investment performance and solid net sales of our funds across multiple channels. We remain focused on protecting our fundholders' investments and believe our proven strategies position our portfolios well for the current environment. Investment outperformance remains a key growth driver, and we are also working on increasing marketing efforts, expanding our offshore segment and introducing new products."
Financial Review
-------------------------------------------------------------------------
3 months 3 months 6 months 6 months 12 months
ended ended ended ended ended
June 30, June 30, June 30, June 30, December
$ millions 2008 2007 2008 2007 31, 2007
-------------------------------------------------------------------------
AUM, beginning of
period 6,801 4,648 6,215 4,239 4,239
-------------------------------------------------------------------------
Net sales 259 482(x) 561 621(x) 1,350
-------------------------------------------------------------------------
Market value
appreciation of
portfolios 666 21 950 291 626
-------------------------------------------------------------------------
AUM, end of period 7,726 5,151 7,726 5,151 6,215
-------------------------------------------------------------------------
(x) Includes the initial public offering of Sprott Molybdenum
Participation Corporation.
In Q2 2008, AUM rose by $925 million, or 14%, to $7.7 billion from $6.8 billion as at March 31, 2008. The increase reflects net sales in the second quarter of $259 million combined with market value appreciation of portfolios of $666 million. In the first six months of 2008, AUM increased by $1.5 billion, or 24%, to $7.7 billion from $6.2 billion as at December 31, 2007. The increase reflects net sales of $561 million and market value appreciation of $950 million. The Company's offshore funds posted the strongest asset growth and accounted for 18% of AUM at June 30, 2008 compared with 13% at June 30, 2007.
On a year-over-year basis, AUM increased by 50% from $5.2 billion due to net sales of $1.3 billion and market value appreciation of $1.3 billion.
Total revenue was $39.5 million and $82.6 million in the three and six months ended June 30, 2008. Total revenue consists of management fees, crystallized performance fees, gains (losses) from proprietary investments, and interest and other income. While management fees are earned throughout the year, performance fees (with the exception of one fund and performance fees attributable to redeemed units together termed as crystallized performance fees) are earned on the last day of the fiscal year and therefore are not included in the financial results for the first three quarters of the year.
For the three months ended June 30, 2008, management fees increased by 38% to $36.6 million, from $26.6 million in the comparable period in 2007. For the six months ended June 30, 2008, management fees rose 41% to $69.4 million, from $49.1 million in the prior year period. The increase in management fees is due to the increase in AUM.
Crystallized performance fees for the three- and six-month periods ended June 30, 2008 were $4.0 million and $4.3 million, respectively, compared to $0.3 million and $0.3 million for the corresponding periods in 2007. The Sprott offshore funds were the largest contributors to the increase in 2008.
Gains (losses) from proprietary investments totaled a net loss of $2.8 million for the quarter and a gain of $5.4 million for the six months ended June 30, 2008. As discussed in the Company's Prospectus dated May 8, 2008, Sprott Asset Management Inc. (SAM) sold the majority of its proprietary investments in anticipation of the initial public offering (IPO). However, SAM retained investments in certain funds that, on a mark-to-market basis, resulted in a net loss from investments for the quarter.
For the quarter ended June 30, 2007, losses on these investments, a dilution loss on the IPO of Sprott Molybdenum Participation Corporation (Sprott Moly) and an impairment of long term assets amounted to $23.6 million and led to unusually low revenues. The dilution loss was in effect a reversal of $11.8 million in unrealized gains on investments held by Sprott Moly in anticipation of its IPO that was completed in April 2007.
Interest and other income increased to $1.6 million and $3.5 million for the three- and six-month periods ended June 30, 2008, compared to $0.4 million and $1.0 million for the comparables periods in 2007. The increase is mainly due to early redemption fees, foreign exchange gains on fees receivable from offshore funds and commissions earned by SAM as part of the selling group for the Sprott Inc.
Expenses for the three- and six-month periods ended June 30, 2008 were $22.6 million and $40.7 million, respectively, compared with $14.1 million and $25.4 million for the corresponding periods in 2007. The increase in expenses reflects costs associated with higher AUM and management fees, primarily trailer fees, additional employees, as well as the change in the way the Company accounts for quarterly employee bonuses.
Net income was $11.4 million, or $0.08 per share, compared with a net loss of $7.7 million in Q2 2007, mainly as a result of the investment and dilution losses described above. For the six months ended June 30, 2008, net income was $28.1 million, or $0.20 per share, versus net income of $11.1 million in the corresponding period of 2007.
Second Quarter Dividend
The Company announced on July 29, 2008 that it has declared a dividend of $0.025 per share for the quarter ended June 30, 2008. The dividend will be paid on August 29, 2008 to shareholders of record on August 11, 2008.
Conference Call and Webcast
A conference call and webcast will be held today, Thursday, July 31, 2008, at 10:30 am ET to discuss the company's financial results and outlook for 2008. To access the conference call, please dial 416-915-5763 or 1-800-590-1508. To access the live webcast, please visit www.sprottinc.com or www.newswire.ca. Participants will require Windows Media Player(TM) to listen to the webcast.
Non-GAAP Financial Measures
This press release includes financial terms (including AUM and net sales) that the Company utilizes to assess the financial performance of its business that are not measures recognized under Canadian generally accepted accounting principles (GAAP). These non-GAAP measures should not be considered alternatives to performance measures determined in accordance with GAAP and may not be comparable to similar measures presented by other issuers. For additional information regarding the Company's use of non-GAAP measures, including the calculation of these measures, please refer to the "Non-GAAP Financial Measures" section of the Company's Management's Discussion and Analysis and its financial statements available on the Company's website at www.sprottinc.com and on SEDAR at www.sedar.com.
Forward-Looking Statements
This release contains "forward-looking statements" which reflect the current expectations of the Company. These statements reflect management's current beliefs with respect to future events and are based on information currently available to management. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements including, without limitation, those listed under the heading "Risk Factors" in the Company's prospectus. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this release. Although the forward-looking statements contained in this release are based upon what the Company and Sprott Asset Management (SAM) believe to be reasonable assumptions, neither the Company nor SAM can assure investors that actual results, performance or achievements will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this release and neither the Company nor SAM assumes any obligation to update or revise them to reflect new events or circumstances.
About Sprott Inc.
Sprott Inc., through its wholly-owned subsidiary Sprott Asset Management Inc., is an independent asset management company with approximately $7.7 billion of assets under management mainly among its 21 investment funds, discretionary managed accounts and management of certain public companies. Sprott Asset Management has a history of offering investment management services to high net worth individuals and institutions for more than 26 years. For more information about the Company, please visit www.sprottinc.com.
Summary Financial Information
Balance Sheet Information
------------------------------------
As at As at
June 30, December 31,
2008 2007
$ $
Total Assets 96,556,139 280,872,838
Total Liabilities 34,726,036 142,785,169
------------------------------------
Shareholders' Equity 61,830,103 138,087,669
For the For the For the For the
three three six six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
Assets Under Management (at period end)
---------------------------------------------------
Assets Under
Management
(in $000's) 7,726,326 5,150,827 7,726,326 5,150,827
Income Statement Information
---------------------------------------------------
Revenue
Management fees 36,627,349 26,559,536 69,390,612 49,107,910
Crystallized
Performance Fees 3,991,360 312,069 4,296,418 345,779
Unrealized and
realized gain (loss)
on proprietary
investments (2,753,506) (10,619,620) 5,396,118 (6,564,541)
Dilution loss related
to Sprott Molybdenum
Participation
Corporation - (11,808,172) - -
Impairment of long
term assets - (1,137,945) - (1,137,945)
Other income 1,440,947 373,177 3,060,621 562,045
Interest income 193,096 8,064 484,334 427,519
-------------------------------------------------------------------------
Total revenue 39,499,246 3,687,109 82,628,103 42,740,767
-------------------------------------------------------------------------
Expenses
Compensation and
benefits 11,281,865 5,887,945 19,800,570 10,528,874
Trailer fees 7,947,954 6,131,877 15,055,607 11,360,795
General and
administration 2,845,916 1,053,009 5,074,699 2,343,138
Donations 365,830 29,400 690,830 30,900
Amortization 172,100 219,846 113,301 388,165
Interest expense - 728,656 - 739,899
-------------------------------------------------------------------------
Total expenses 22,613,665 14,050,733 40,735,007 25,391,771
-------------------------------------------------------------------------
Income (loss) before
income taxes for
the period 16,885,581 (10,363,624) 41,893,096 17,348,996
Provision for
(recovery of) income
taxes 5,494,835 (2,687,360) 13,792,835 6,238,000
-------------------------------------------------------------------------
Net income (loss) and
comprehensive income
(loss) for the period 11,390,746 (7,676,264) 28,100,261 11,110,996
-------------------------------------------------------------------------