Sprott Inc. Press Releases


Press Release

Sprott Inc. announces third quarter 2008 results

        TORONTO, Oct. 30 /CNW/ - Sprott Inc. (TSX:SII) ("Sprott" or the  "Company") today announced its financial results for the three- and nine-month  periods ended September 30, 2008.        Q3 2008 Highlights-   Assets under management (AUM) of $5.6 billion, compared to          $7.7 billion as at June 30, 2008 and $5.5 billion as at          September 30, 2007      -   Management fees were $32.9 million, an increase of 19% compared to          $27.7 million in Q3 2007      -   Base EBITDA rose 9% year-over-year to $15.2 million      -   Net income was $3.7 million ($0.02 per share) versus $3.5 million in          Q3 2007      -   Launched the Sprott All Cap Fund in September      -   One of three lead managers for Star Hedge Managers Corp., which          raised gross proceeds of $75 million in September      -   Declared a third quarter dividend of $0.025 per share on          October 28, 2008"The financial markets have suffered unprecedented declines since the  beginning of July across all sectors, causing our assets under management,  like most investment managers, to decrease considerably during the third  quarter. While we anticipated a market downturn in 2008 and positioned our  portfolios defensively, we did not expect investors to punish real, hard  assets, in particular gold and gold stocks," said Eric Sprott, President and  CEO. "Despite the difficult market conditions, net sales were positive during  the period, which we believe is a true testament to our performance track  record. However, given the impact of the financial crisis on hedge funds  globally, we have increased the liquidity in our hedge funds to deal with  possible redemptions."      Mr. Sprott continued: "Throughout our history, we have witnessed a number  of performance declines due to adverse market events, and most of these  downturns have been followed by periods of significant outperformance in our  funds. We remain confident that our investment strategies will deliver strong  growth over the long term and support our efforts to increase our market share  of the Canadian and global asset management industries. With a strong brand  name and portfolio managers with exceptional track records, we believe we have  a tremendous growth opportunity ahead of us."        Financial Review        For the three months ended September 30, 2008, AUM decreased by  $2.1 billion, or 27%, to $5.6 billion from $7.7 billion as at June 30, 2008.  Net sales were $122 million, however, market value depreciation contributed  $2.2 billion to the decline in AUM. This compares to net sales of $255 million  and gains from investment performance of $131 million in Q3 2007. Since  December 31, 2007, AUM has declined by $609 million, or 10%. The decrease  reflects net sales of $680 million and market value depreciation of  $1.3 billion.      The funds that were affected most by the market turmoil were the "long  only" funds, which accounted for 42% of AUM at the end of September compared  to 51% at the end of June.      On a year-over-year basis, AUM increased by 1% as a result of net sales  of $1.2 billion and market value depreciation of $1.1 billion.-------------------------------------------------------------------------                          3 months   3 months   9 months   9 months  12 months        $ millions           ended      ended      ended      ended      ended                         September  September  September  September   December                          30, 2008   30, 2007   30, 2008   30, 2007   31, 2007      -------------------------------------------------------------------------      AUM, beginning       of period             7,726      5,151      6,215      4,239      4,239      -------------------------------------------------------------------------      Net sales                122        255        680      876(*)     1,350      -------------------------------------------------------------------------      Market value       appreciation of       portfolios           (2,242)       131     (1,289)       422        626      -------------------------------------------------------------------------      AUM, end of period     5,606      5,537      5,606      5,537      6,215      -------------------------------------------------------------------------      (*) Includes the initial public offering of Sprott Molybdenum          Participation Corporation.In Q3 2008, total revenue increased by 18% to $25.4 million from  $21.6 million in Q3 2007. 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.      Management fees rose by 19% to $32.9 million, from $27.7 million in Q3  2007, as average AUM increased by 25% over the same period to $6.7 billion  from $5.3 billion.      Crystallized performance fees were $1.3 million, compared to $1.1 million  for the corresponding period in 2007. The Sprott offshore funds were the  largest contributors to the increase in 2008.      Unrealized losses from proprietary investments totaled $9.7 million. 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  certain investments that, on a mark-to-market basis, resulted in a net loss  from investments for the quarter. In Q3 2007, revenue was negatively impacted  by a $0.9 million loss on these investments, as well as a $6.4 million  impairment of long-term investments. The 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.      Interest and other income increased to $1.0 million, compared to  $0.1 million in Q3 2007. The increase is mainly due to early redemption fees  and foreign exchange gains on fees receivable from offshore funds.      Expenses were $19.8 million, compared with $12.1 million in Q3 2007. The  increase in expenses reflects costs associated with a higher average 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 $3.7 million ($0.02 per share), compared with $3.5 million  in Q3 2007.      For the nine months ended September 30, 2008, total revenue rose 68%  year-over-year to $108.1 million. Management fees increased 33% to  $102.3 million, from $76.8 million in the prior year period. Crystallized  performance fees were $5.6 million, compared to $1.5 million in the first nine  months of 2007. Losses from proprietary investments totaled $4.3 million.  Interest and other income increased to $4.6 million, versus $1.1 million in  the prior year period. Expenses were $60.6 million compared to $37.5 million  for the corresponding period in 2007. Net income was $31.8 million, or $0.22  per share, versus net income of $14.6 million in the nine months ended  September 30, 2007.        Third Quarter Dividend        The Company announced on October 28, 2008 that it has declared a dividend  of $0.025 per share for the quarter ended September 30, 2008. The dividend  will be paid on November 28, 2008 to shareholders of record on November 10,  2008.        Conference Call and Webcast        A conference call and webcast will be held today, Thursday, October 30,  2008, at 11:30 am ET to discuss the company's financial results and outlook  for 2008. To access the call, please dial 416-644-3417 or 1-800-732-6179. To  access the live webcast, please visit www.sprottinc.com or www.newswire.ca.  Participants will require Windows Media Playerâ„¢ 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 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.Summary Financial Information                                                       Balance Sheet Information                                             ----------------------------------                                                            As at          As at                                                   September 30,   December 31,                                                           2008           2007                                                              $              $      Total Assets                                   83,302,860    280,872,838      Total Liabilities                              20,980,273    142,785,169                                             ----------------------------------      Shareholders' Equity                           62,322,587    138,087,669                          For the three  For the three   For the nine   For the nine                     months ended   months ended   months ended   months ended                     September 30,  September 30,  September 30,  September 30,                         2008           2007           2008           2007                           $              $              $              $      -------------------------------------------------------------------------                                   Assets Under Management (at period end)                   ------------------------------------------------------------      Assets       Under       Management   5,606,001,789  5,536,723,922  5,606,001,789  5,536,723,922                                       Income Statement Information                   ------------------------------------------------------------      Revenue      Management       fees            32,860,329     27,663,787    102,250,941     76,771,697      Crystallized       Performance       Fees             1,257,621      1,116,281      5,554,039      1,462,060      Unrealized and       realized losses       on proprietary       investments     (9,706,266)      (887,565)    (4,310,148)    (7,452,106)      Impairment of       long term       assets                   -     (6,400,000)             -     (7,537,945)      Other income        720,752         32,013      3,781,373        594,058      Interest income     293,753         72,863        778,087        500,382      -------------------------------------------------------------------------      Total revenue    25,426,189     21,597,379    108,054,292     64,338,146      -------------------------------------------------------------------------        Expenses      Compensation       and benefits     9,512,719      3,992,356     29,313,289     14,521,230      Trailer fees      7,022,042      6,142,583     22,077,649     17,503,378      General and       administration   2,721,014      1,471,536      7,795,713      3,814,674      Donations           305,778         11,528        996,608         42,428      Amortization        269,031        182,088        382,332        570,253      Interest expense          -        284,465                     1,024,364      -------------------------------------------------------------------------      Total expenses   19,830,584     12,084,556     60,565,591     37,476,327      -------------------------------------------------------------------------      Income (loss)       before income       taxes            5,595,605      9,512,823     47,488,701     26,861,819        Provision for       income taxes     1,927,165      5,989,252     15,720,000     12,227,252      -------------------------------------------------------------------------      Net income and       comprehensive       income for the       period           3,668,440      3,523,571     31,768,701     14,634,567      -------------------------------------------------------------------------      -------------------------------------------------------------------------

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