TORONTO, March 26 /CNW/ - Sprott Inc. (TSX:SII) ("Sprott" or the "Company") today announced its financial results for the quarter and year ended December 31, 2008.
Fiscal 2008 Highlights
- Assets Under Management (AUM) were $4.4 billion as at
December 31, 2008 compared to $6.2 billion as at December 31, 2007
and $5.6 billion as at September 30, 2008
- Management Fees were $124.0 million, an increase of $16.0 million or
15% over 2007
- Performance Fees were $47.9 million, including $35.6 million earned
by Sprott Consulting L.P. from its management of Sprott Resource
Corporation
- Base EBITDA was $57.1 million compared to $49.3 million in 2007
(assuming the 2008 bonus pool program had been in effect in 2007)
- Net income was $52.1 million ($0.36 per share), versus $42.3 million
($0.32 per share) in 2007
- Declared a fourth quarter dividend of $0.025 per share and a special
dividend of $0.15 per share
Subsequent to Year-End
- Planned launch of two new funds - the Sprott Gold Bullion Fund
(March 2009) and the Sprott FNSSC(1) Multi-Manager Fund (April 2009),
a Fund composed of five Sprott mutual funds, which will be
exclusively available to FNSSC members
- Planned reorganization to separate Sprott Asset Management (SAM) into
three areas - Sprott Asset Management L.P., Sprott Private Wealth
L.P. and Sprott Consulting L.P.
(1) Federation of National Specialty Societies of Canada
"Against an industry backdrop of massive net redemptions, we had net positive sales in 2008. This is a testament to our track record of success, loyal client base, new products and relatively strong performance from our hedge funds," said Eric Sprott, President and CEO of Sprott Inc. "While market declines contributed to a 28% decline in AUM year-over-year, we reported a 16% rise in Base EBITDA and a 13% increase in earnings per share due in part to our variable cost structure. As a result, we were able to generate strong cash flows and pay dividends of $0.225 per share. At the end of 2008, the Company remains financially strong with a healthy cash balance and no debt."
"The current global economic crisis is unprecedented in scale and scope, making investment analysis unusually challenging," added Mr. Sprott. "However, we have successfully navigated our Funds through volatile markets before to build an impressive long-term track record, and we believe we have an experienced team of investment professionals to do so again. Looking ahead, we continue to build on our investment themes and trends, and to pursue our growth initiatives. These initiatives include leveraging our investment team to increase AUM, expanding our sales and marketing efforts, introducing new products and capitalizing on Sprott Consulting. This vehicle has proved to be a valuable addition to our business as evidenced by its performance fee contribution in 2008."
Assets Under Management
For fiscal 2008, AUM decreased to $4.4 billion, compared to $6.2 billion at December 31, 2007. Net sales were $95 million; however, market values declined by $1.9 billion resulting in a net decrease in AUM of $1.8 billion in 2008.
The fourth quarter of 2008 saw AUM decline by $1.2 billion from $5.6 billion at September 30, 2008. The decrease reflected a combination of $0.6 billion in net redemptions and $0.6 billion in net market value depreciation. The majority of the Company's fourth quarter redemptions related to offshore hedge funds. A substantial portion of these funds are owned by institutional investors, many of whom manage fund-of-fund structures which were susceptible to a "de-leveraging" or risk reduction process. Net market value depreciation primarily related to our domestic "long only" mutual funds.
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Year ended Year ended
$ millions December 31, 2008 December 31, 2007
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AUM, beginning of period 6,215 4,239
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Net sales (redemptions) 95 1,350
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Market value appreciation
(depreciation) of portfolios (1,861) 626
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AUM, end of period 4,449 6,215
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Income Statement
Total revenues in 2008 decreased by $61.9 million, or 27%, to $165.8 million from $227.6 million in 2007. Total revenue consists of management fees, performance fees, gains (losses) from proprietary investments, and interest and other income.
Management fees increased by $16.0 million, or 15%, to $124.0 million from $108.0 million in 2007, as monthly average AUM increased by approximately 22% over the same period.
Performance Fees were $47.9 million as compared to $129.2 million for the prior year. In 2007, most of the Company's hedge funds and mutual funds generated Performance Fees. In 2008, the global economic crisis created a challenging investing environment and led to a significant decrease in such fees. Of the total 2008 Performance Fees, $35.6 million was earned by Sprott Consulting from its management of Sprott Resource Corporation, with the remainder generated primarily by Sprott's domestic and offshore hedge funds.
As discussed in the Company's Prospectus dated May 8, 2008, SAM sold the majority of its proprietary investments in anticipation of the initial public offering. However, SAM retained certain investments that, on a mark-to-market basis, resulted in a net loss from investments of $11.7 million in 2008 and $4.2 million in 2007. In addition, Sprott reported a $7.5 million impairment of long-term investments in 2007. These long-term investments consisted of investments in oil and gas properties and were distributed to SAM shareholders by way of a dividend-in-kind in April 2008.
Other income increased by $3.1 million to $4.6 million compared with 2007. This increase is mainly due to early redemption fees ($2.4 million) and foreign exchange gains ($1.5 million).
Total expenses were $86.5 million, a decrease of $88.7 million, or 51%, compared with $175.2 million for 2007. The decrease is mainly attributable to a decrease in compensation and benefits of $94.7 million, as a result of higher compensation payments in 2007 as well as a change in the bonus compensation arrangements made in 2008.
Net income was $52.1 million ($0.36 per share), compared with net income of $42.3 million ($0.32 per share) for the corresponding period in 2007.
For the fourth quarter of 2008, total revenue was $57.7 million compared to $163.3 million in the prior year period. Management Fees decreased by 30% to $21.7 million primarily as a result of a 19% decline in average monthly AUM. Performance Fees fell by $85.3 million to $42.4 million, of which $35.6 million related to fees earned by Sprott Consulting. Base EBITDA was $8.1 million. On a comparable basis, had the bonus pool program that was implemented effective in 2008 been in effect for 2007, and everything else remaining constant, Base EBITDA in the fourth quarter of 2007 would have been $12.9 million. Net income was $20.4 million ($0.14 per share) in the fourth quarter of 2008 compared to $27.6 million ($0.21 per share) in the prior year period.
Dividends
In February 2009, a dividend of $0.025 per common share was declared for the quarter ended December 31, 2008. In March 2009, the Company's Board of Directors declared a special dividend of $0.15 per common share following receipt of Performance Fees for the year ended December 31, 2008.
Conference Call and Webcast
A conference call and webcast will be held today, Thursday, March 26, 2009, at 10:30 am EDT to discuss the Company's financial results. To access the call, please dial 416-644-3415 or 1-800-733-7560. 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 Inc. (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 dedicated to achieving superior returns for its investors over time. Sprott Asset Management manages assets primarily for high net worth individuals and institutions, and is the investment manager of the Sprott family of funds. For more information about the Company, please visit www.sprottinc.com.
Selected Annual Financial Information
As at December 31
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(In $ 000's) 2008 2007 2006
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Assets Under Management 4,448,708 6,215,273 4,239,291
Balance Sheet Information
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Total Assets 123,430 280,873 248,380
Total Liabilities 43,916 142,785 133,374
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Shareholders' Equity 79,514 138,088 115,006
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Income Statement Information
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Total Revenue 165,757 227,621 198,626
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Net Income 52,136 42,282 34,786
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Net Income Per Share - basic 0.36 0.32 0.27
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Net Income Per Share - fully diluted 0.36 0.32 0.27
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Income Statement
For the For the
year ended year ended
December December
(In $ 000's) 31, 2008 31, 2007
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Revenue
Management fees 123,970 108,020
Performance Fees 47,922 129,158
Unrealized and realized losses on proprietary
investments (11,722) (4,240)
Impairment of long-term investments - (7,467)
Other income 4,588 1,522
Interest income 999 628
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Total revenue 165,757 227,621
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Expenses
Compensation and benefits 46,823 141,489
Trailer fees 26,491 24,415
General and administration 11,006 6,858
Donations 1,651 822
Amortization 574 513
Interest expense - 1,143
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Total expenses 86,545 175,240
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Income before income taxes 79,212 52,381
Provision for income taxes 27,076 10,099
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Net income and comprehensive income for the period 52,136 42,282