TORONTO, Nov. 5 /CNW/ -- Sprott Inc. (TSX: SII) ("Sprott" or the "Company") today announced its financial results for the three- and nine-month periods ended September 30, 2009.
Q3 2009 Highlights:
- Assets Under Management ("AUM") were $4.3 billion as at September 30,
2009, compared to $5.6 billion as at September 30, 2008 and
$4.4 billion as at June 30, 2009
- Management Fees were $20.7 million, a decrease of $12.2 million, or
37%, from Q3 2008
- Base EBITDA was $8.0 million, compared with $15.2 million in the
comparable prior year period
- Net income was $5.5 million ($0.04 per share), versus $3.7 million
($0.02 per share) in Q3 2008
- Declared a third quarter dividend of $0.025 per share on November 3,
2009
- Introduced low-load option for investors in Series A units of Sprott
mutual funds
- Effective November 2, 2009, expanded the distribution of the
FNSSC(1)-Multi Manager Fund from FNSSC members only to all eligible
investors (name of the fund changed to "Sprott Multi-Manager Fund")
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(1) Federation of National Specialty Societies of Canada
"During the third quarter, many of our mutual funds benefited from the continued momentum in equity markets, as well as superior stock picking by our investment managers, with both the Sprott Small Cap Equity Fund and the Sprott Energy Fund posting returns of more than 17%," said Eric Sprott, President and CEO of Sprott Inc. "We continue to believe that gold and other precious metals will be the best store of value for investors over the longer term. As such, several of our larger funds have significant investments in physical gold and silver, as well as mining stocks. So far this year, this thesis has been supported by the performance of the Sprott Gold and Precious Minerals Fund, which gained over 21% during the third quarter and over 77% for the first nine months of 2009."
"We continue to work diligently to drive growth in each of our three businesses: Sprott Asset Management, Sprott Private Wealth, and Sprott Consulting. Sprott Consulting has added a valuable private equity-type component to our revenue mix, and contributed significantly to our revenues in 2008. We expect further strong performance from this business in the future," added Mr. Sprott. "As we continue to expand our product offering, we recently began offering external income products to our Sprott Private Wealth clients. We are continually seeking new opportunities to provide a greater breadth of investment choices to our clients, and expect to introduce one or more new products in the next several months."
Assets Under Management
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Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
$ millions 30, 2009 30, 2008 30, 2009 30, 2008
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AUM, beginning of quarter 4,444 7,726 4,449 6,215
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Net sales (redemptions) (252) 122 (503) 680
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Market value appreciation
(depreciation) of portfolios 146 (2,242) 392 (1,289)
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AUM, end of quarter 4,338 5,606 4,338 5,606
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In the third quarter of 2009, AUM decreased to $4.3 billion, compared to $4.4 billion at June 30, 2009. The $0.1 billion decrease reflected market value increases of $0.15 billion, offset by net redemptions of $0.25 billion.
On a year-over-year basis, AUM decreased by 22.6% to $4.3 billion compared to $5.6 billion at September 30, 2008. The decrease in AUM is due to the lower market value of portfolios combined with net redemptions since June 30, 2008.
Income Statement
Total revenue for the third quarter of 2009 decreased by 13.4% to $22.0 million, from $25.4 million in the third quarter of 2008. For the nine months ended September 30, 2009, total revenue was $71.8 million, a decrease of 33.6% from the corresponding period in 2008. Total revenue consists of management fees, crystallized performance fees, net gains and losses from proprietary investments, and interest and other income.
Management fees declined by 37.0% to $20.7 million, from $32.9 million in the third quarter of 2008, as monthly average AUM decreased by approximately 37.0% over the same period. For the first nine months of 2009, management fees declined by 36.5% to $65.0 million, compared to $102.3 million for the nine months ended September 30, 2008.
Crystallized performance fees for the three- and nine-month periods ended September 30, 2009 were $0.2 million and $2.4 million, compared to $1.3 million and $5.6 million in the prior year. During the first nine months of 2008, significant performance fees accrued by the Funds resulted in the crystallization of those fees when the Funds were redeemed. In the first nine months of 2009, accrued performance fees were substantially lower, resulting in reduced crystallized performance fees earned upon redemption of the underlying Funds.
Gains from proprietary investments in the third quarter and first nine months of 2009, totaled $0.7 million and $3.6 million, respectively, compared with a loss of $9.7 million and loss of $4.3 million for the third quarter and first nine months of 2008, respectively. The gains in the quarter and first nine months of 2009 were mainly due to market appreciation of the investments in public equities. As of September 30, 2009, proprietary investments consisted of an investment in various public and private equities, investments in various funds managed by Sprott Asset Management, investments in gold bullion and an investment in a secured note receivable.
Other income decreased by $0.5 million to $0.5 million for the quarter ended September 30, 2009 and declined by $3.7 million to $0.9 million for the nine months ended September 30, 2009, compared with the corresponding periods the prior year. The decline in the current quarter is mainly due to a higher foreign exchange loss, lower early redemption fees, and lower commissions which more than offset higher interest revenue, compared to the third quarter of 2008. Similarly, for the nine-month period ending September 30, 2008, the Company reported a foreign exchange gain, as well as higher early redemption fees, higher interest revenue and higher commission income as compared to the corresponding periods in 2009.
Total expenses for the three- and nine-month periods ended September 30, 2009 were $14.0 million and $45.1 million, respectively, a decrease of $5.8 million, or 29.5%, and $15.5 million, or 25.6%, compared with the corresponding periods in 2008. The decline in the third quarter was mainly attributable to a decrease in compensation and benefits of $3.3 million and a decrease in trailer fees of $2.4 million as compared with the third quarter 2008. Similarly, the decline during the nine-month period ended September 30, 2009 was mainly due to a decrease in compensation and benefits of $8.3 million and a decrease in trailer fees of $8.0 million, partially offset by an increase in general and administrative costs of $0.7 million. Although higher year over year, general and administrative expenses have declined quarterly on a sequential basis since the first quarter of 2009.
Net income for the third quarter of 2009 was $5.5 million ($0.04 per share) and $18.5 million ($0.12 per share) in the first nine months of 2009, compared with net income of $3.7 million ($0.02 per share) and $31.8 million ($0.22 per share) for the corresponding periods in 2008.
Dividends
On November 3, 2009 the Company declared an eligible dividend of $0.025 per share for the quarter ended September 30, 2009. The dividend will be paid on November 30, 2009 to shareholders of record on November 13, 2009.
Conference Call and Webcast
A conference call and webcast will be held today, Thursday, November 5, 2009, at 10:00am EST to discuss the Company's financial results. To access the call, please dial 416-644-3421 or 1-800-814-4861. 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 annual information form dated March 24, 2009. 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 believes to be reasonable assumptions, the Company cannot 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 the Company does not assume any obligation to update or revise them to reflect new events or circumstances.
About Sprott Inc.
Sprott Inc. is a leading independent asset manager dedicated to achieving superior returns for its clients over the long term. The company currently operates through three distinct business units: Sprott Asset Management L.P. ("Sprott Asset Management"), Sprott Private Wealth L.P. ("Sprott Private Wealth"), and Sprott Consulting L.P. ("Sprott Consulting").
Sprott Asset Management is the investment manager of the Sprott family of mutual funds and hedge funds and discretionary managed accounts; Sprott Private Wealth provides wealth management services to high net worth individuals; and Sprott Consulting provides management, administrative and consulting services to other companies, including Sprott Resource Corp. (TSX: SCP).
Sprott Inc. is headquartered in Toronto, Canada, and is listed on the Toronto Stock Exchange under the symbol "SII".
Balance Sheet Information
September 30, 2009 December 31, 2008
(In $ 000's,) $ $
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Total Assets 82,095 123,430
Total Liabilities 16,092 43,916
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Shareholders' Equity 66,003 79,514
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Summary Income Statement
For the For the For the For the
three three nine nine
months months months months
ended ended ended ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
(In $ 000's, except
per share amounts) $ $ $ $
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Revenue
Management fees 20,702 32,860 64,971 102,251
Crystallized Performance Fees 152 1,257 2,367 5,554
Unrealized and realized gains
(losses) on proprietary
investments 657 (9,706) 3,567 (4,310)
Other income 520 1,015 874 4,559
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Total revenue 22,031 25,426 71,779 108,054
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Expenses
Compensation and benefits 6,212 9,513 21,025 29,313
Trailer fees 4,672 7,022 14,092 22,078
General and administration 2,620 2,721 8,454 7,796
Donations 285 306 861 997
Amortization 197 269 636 382
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Total expenses 13,986 19,831 45,068 60,566
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Income before income taxes 8,045 5,595 26,711 47,488
Provision for income taxes 2,539 1,927 8,194 15,720
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Net income and comprehensive
income for the period 5,506 3,668 18,517 31,768
Other expenses(1) 771 843 2,358 1,332
Provision for income taxes 2,539 1,927 8,194 15,720
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EBITDA 8,816 6,438 29,069 48,820
Unrealized and realized
(gains) losses on
proprietary investments (657) 9,706 (3,567) 4,310
Performance fees net of
performance fee related
bonus pool(2) (114) (943) (1,775) (4,165)
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Base EBITDA 8,045 15,201 23,727 48,965
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Net Income Per Share - basic .04 .02 .12 .22
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Net Income Per Share - fully
diluted .04 .02 .12 .22
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(1) Includes interest, amortization and non-cash stock-based compensation
expense.
(2) Performance Fee related bonus pool is equal to 25% of Performance Fee
Revenue.
