Press Release

Sprott Inc. Announces 2013 Annual Results

TORONTO, March 27, 2014 /CNW/ - Sprott Inc. (TSX: SII) ("Sprott" or the "Company") today announced its financial results for the year ended December 31, 2013.

2013 Financial Overview

  • Assets Under Management ("AUM") were $7.0 billion as at December 31, 2013, compared to $9.9 billion as at December 31, 2012 and $7.3 billion as at September 30, 2013
  • Assets Under Administration ("AUA") were $2.3 billion as at December 31, 2013, compared to $3.7 billion as at December 31, 2012 and $2.6 billion as at September 30, 2013
  • Management Fees were $84.7 million, a decrease of 28.5% compared with the year ended December 31, 2012
  • EBITDA was $34.9 million ($0.17 per share), compared with $57.3 million ($0.34 per share) for the year ended December 31, 2012, a decrease of 39.1%
  • For the year ended December 31, 2013, goodwill resulting from the acquisition of Global Companies was assessed as being impaired and a charge against earnings of $88.0 million was taken. This is a non-cash charge and will not affect the Company's ongoing operations
  • Net loss was $81.3 million ($(0.39) per share) for the year ended December 31, 2013, compared with net income of $32.0 million ($0.19 per share) for the year ended December 31, 2012
  • As of December 31, 2013, the Company had approximately $350 million in available capital

Significant events for the year-ended December 31, 2013 and year-to-date 2014:

  • Named John Wilson and Scott Colbourne Co-Chief Investment Officers of Sprott Asset Management LP ("SAM")
  • Signed joint venture agreement to launch new offshore fund with Zijin Mining Group Co., Ltd.
  • Completed acquisition of Sprott Resource Lending Corp.
  • Secured mandate to co-manage $750 million South Korean private equity fund
  • Entered agreement to acquire three real assets focused funds to be managed by Capital Innovations Ltd., Inc.
  • Provided update on Eric Sprott transition and succession plan and appointed John Wilson Chief Executive Officer of SAM

"In 2013, ongoing weakness in the natural resource sector, particularly precious metals, took a toll on our investment performance and financial results, causing our Assets Under Management to fall to $7 billion at year end," said Peter Grosskopf, Chief Executive Officer of Sprott. "Our results for the year were also negatively impacted by a one-time non-cash charge associated with the 2011 acquisition of the Global Companies. This charge has no impact on the ongoing business of the Company."

"While it has been a challenging period for the Company, we are encouraged by our early results over the first quarter of 2014. Precious metals and related equities have staged a strong recovery and all of our funds have posted positive performance so far this year," added Mr. Grosskopf.

"Going forward, we will work to advance our dual strategy of establishing Sprott as a global leader in precious metals and resource investing, while continuing to diversify and grow our Canadian asset management platform," concluded Mr. Grosskopf. "With approximately $350 million in available capital, we have the financial strength to seed and launch new products, while also selectively evaluating strategic acquisition opportunities."

  For the year ended
  December 31,
($ in millions) 2013 2012
     
AUM, beginning of period 9,931 9,137
Net sales (redemptions) (387) 1,308
Business acquisition (188) 428
Market value depreciation of portfolios (2,389) (942)
AUM, end of period 6,967 9,931

Assets Under Management

AUM at December 31, 2013, decreased by 29.9% to $7.0 billion from $9.9 billion at December 31, 2012. Net redemptions for the year ended December 31, 2013 were $0.4 billion. Average AUM for the year ended December 31, 2013 was $8.1 billion compared with $9.6 billion for the year ended December 31, 2012, a decrease of 16.5%.

Income Statement

Total revenues for the year ended December 31, 2013, decreased by 27.7% to $114.4 million from $158.2 million for the year ended December 31, 2012.

For the year ended December 31, 2013, Management Fees decreased by 28.5% to $84.7 million from $118.5 million in the year ended December 31, 2012.  Decreases in Management Fees as a percentage of average AUM are mainly due to an increase in the relative value of AUM of our fixed income Funds and bullion Funds that have lower average Management Fees than most of our other Funds.

Gross Performance Fees for the year ended December 31, 2013 were $9.0 million, representing a decrease of $1.0 million over the corresponding period in 2012.

Commission revenue for the year ended December 31, 2013, decreased by $7.3 million to $6.2 million from $13.5 million compared to the year ended December 31, 2012. During the year ended December 31, 2013, SGRIL and SPW earned less in commissions from the sale and purchase of stocks by its clients, particularly private placements as junior resource companies were not as active in the equity capital markets. Also there were no new issuances of the physical bullion trusts to SGRIL and SPW clients during 2013.

Interest income increased substantially for the year ended December 31, 2013 to $9.8 million from $2.7 million for the year ended December 31, 2012.  The year ended December 31, 2013 included interest income from SRLC since its acquisition on July 23, 2013. The majority of interest income earned by the Company is generated by SRLC through resource-based loans.

Unrealized and realized losses from capital invested in proprietary investments and loans for the year ended December 31, 2013 totaled $14.5 million compared with gains of $2.3 million for the year ended December 31, 2012. During the year ended December 31, 2013, sales of proprietary investments resulted in net realized losses of $2.1 million and the market value of most of our remaining proprietary investments depreciated resulting in net unrealized losses of $12.4 million.

Other income increased by $7.9 million from $11.2 million in the year ended December 31, 2012 to $19.1 million in the year ended December 31, 2013.

Total expenses for the year ended December 31, 2013 were $200.4 million, an increase of $84.0 million or 72.1% compared with $116.4 million for the year ended December 31, 2012. Excluding the impairment of goodwill, total expenses increased by $5.0 million (4.6%), when compared with the year ended December 31, 2012.

EBITDA for the year ended December 31, 2013, decreased by 39.1% to $34.9 million from $57.3 million in the year ended December 31, 2012.

Net loss for the year ended December 31, 2013 was $81.3 million compared to net income of $32.0 million for the year ended December 31, 2012. The loss during the year ended December 31, 2013 was due in part to a goodwill impairment charge against earnings in the amount of $88.0 million that related to the 2011 acquisition of Global Companies. This is a non-cash charge and will not affect the Company's ongoing operations.

Basic and diluted earnings per share for the year ended December 31, 2013 was negative $0.39, versus $0.19 for the year ended December 31, 2012.

Dividends

On November 12, 2013, a dividend of $0.03 per common share was declared for the quarter ended September 30, 2013. On March 25, 2014, a dividend of $0.03 per common share was declared for the quarter ended December 31, 2013.

Conference Call and Webcast

A conference call and webcast will be held today, Thursday, March 27, 2014 at 10:00am ET to discuss the Company's financial results. To participate in the call, please dial 647-427-7451 or 1-888-231-8192 ten minutes prior to the scheduled start of the call. A taped replay of the conference call will be available until Thursday, April 3, 2014 by calling 416-764-8677or 1-888-390-0541, reference number 23440154. The conference call will be webcast live at www.sprottinc.com and www.newswire.ca

*Non-IFRS Financial Measures

This press release includes financial terms (including AUM, AUA, EBITDA and net sales) that the Company utilizes to assess the financial performance of its business that are not measures recognized under International Financial Reporting Standards ("IFRS"). These non-IFRS measures should not be considered alternatives to performance measures determined in accordance with IFRS and may not be comparable to similar measures presented by other issuers. For additional information regarding the Company's use of non-IFRS measures, including the calculation of these measures, please refer to the "Non-IFRS 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 Information and Statements

This news release contains certain forward-looking information and statements (collectively referred to herein as "Forward-Looking Statements") within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify Forward-Looking Statements. In particular, but without limiting the forgoing, this news release contains Forward-Looking Statements pertaining to: (i) the advancement of the Company's dual strategy of establishing Sprott as a global leader in precious metals and resource investing, while continuing to diversify and grow its Canadian asset management platform; and (ii) the seeding and launching of new products and the evaluation of strategic acquisition opportunities.

Forward-Looking Statements are based on a number of expectations or assumptions, which have been used to develop such information and statements but which may prove to be incorrect, including, but not limited to: (i) future exchange rates will remain consistent with the current environment; (ii) the price of precious metals will increase; (iii) the resource sector will recover; (iv) the impact of increasing competition in each business in which the Company operates will not be material; (v) quality management will be available; (vi) the effects of regulation and tax laws of governmental agencies will be consistent with the current environment; and (vii) those assumptions disclosed under the heading "Critical Accounting Judgments and Estimates" in the Company's Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2013.  Although the Company believes the expectations and assumptions reflected in such Forward-Looking Statements are reasonable, undue reliance should not be placed on Forward-Looking Statements because the Company can give no assurance that such expectations and assumptions will prove to be correct. The Forward-Looking Statements included in this news release are not guarantees of future performance and should not be unduly relied upon.  Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors, which may cause actual results or events to differ materially from those anticipated in such Forward-Looking Statements, including, without limitation, (i) difficult market conditions; (ii) changes in the investment management industry; (iii) risks related to regulatory compliance; (iv) failure to deal appropriately with conflicts of interest; (v) failure to continue to retain and attract quality staff; (vi) competitive pressures; (vii) corporate growth may be difficult to sustain and may place significant demands on existing administrative, operational and financial resources; (viii) failure to execute the Company's succession plan; (ix) litigation risk; * employee errors or misconduct could result in regulatory sanctions or reputational harm; (xi) failure to implement effective information security policies, procedures and capabilities; (xii) failure to develop effective business resiliency plans; (xiii) failure to obtain or maintain sufficient insurance coverage on favourable economic terms; (xiv) foreign exchange risk relating to the relative value of the U.S. dollar; (xv) historical financial information is not necessarily indicative of future performance; (xvi) the market price of common shares of the Company may fluctuate widely and rapidly; (xvii) those risks listed under the heading "Risk Factors" in the Company's annual information form dated March 27, 2014; (xviii) those risks disclosed under the heading "Managing Risk" in the Company's MD&A for the year ended December 31, 2013; and (xix) other risks, which are beyond the control of the Company or its subsidiaries. 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 news release. In addition, the payment of dividends is not guaranteed and the amount and timing of any dividends payable by the Company will be at the discretion of the Board of Directors of the Company and will be established on the basis of the Company's earnings, the satisfaction of solvency tests imposed by applicable corporate law for the declaration and payment of dividends, and other relevant factors.

The Forward-Looking Statements contained in this news release speak only as of the date of this news release, and the Company does not assume any obligation to publicly update or revise any of the included Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

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 primarily through six business units: Sprott Asset Management LP, Sprott Private Wealth LP, Sprott Consulting LP, Sprott Resource Lending Corp., Sprott Toscana and Sprott U.S. Holdings Inc.  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 and Sprott Toscana provide management, administrative and consulting services to other companies. Sprott Resource Lending provides lending services to mining and energy sectors. Sprott U.S. Holdings Inc. includes Sprott Global Resource Investments Ltd, Sprott Asset Management USA Inc., and Resource Capital Investments Corporation. Sprott Inc. is headquartered in Toronto, Canada, and is listed on the Toronto Stock Exchange under the symbol "SII". For more information on Sprott Inc., please visit www.sprottinc.com.

 

SOURCE Sprott Inc.

For further information:

Investor contact information:

Glen Williams
Director of Communications
Sprott Inc.
(416) 943-4394
gwilliams@sprott.com