Sprott Inc. announces second quarter 2009 results



    TORONTO, Aug. 6 /CNW/ - Sprott Inc. (TSX: SII) ("Sprott" or the
"Company") today announced its financial results for the three- and six-month
periods ended June 30, 2009.

    
    Q2 2009 Highlights

    -   Assets Under Management (AUM) were $4.4 billion as at June 30, 2009,
        compared to $7.7 billion as at June 30, 2008 and $4.7 billion as at
        March 31, 2009
    -   Management Fees were $21.7 million, a decrease of $15.0 million, or
        40.8%, over Q2 2008
    -   Base EBITDA was $7.6 million, compared with $17.2 million in the
        prior year period
    -   Net income was $5.6 million ($0.04 per share), versus $11.4 million
        ($0.08 per share) in Q2 2008
    -   Declared a second quarter dividend of $0.025 per share on August 4,
        2009
    -   Completed reorganization of Sprott Asset Management Inc. including
        the introduction of the Sprott Private Wealth brand to capitalize on
        growth opportunities in the private client market
    

    "North American equity markets rallied during the second quarter of 2009,
contributing to strong performance from several of our funds, including the
Sprott Small Cap Hedge Fund, managed by Allan Jacobs and Peter Imhof, and the
Sprott Gold and Precious Minerals Fund, managed by Charles Oliver and Jamie
Horvat," said Eric Sprott, President and CEO of Sprott Inc. "However, some of
our larger funds did not fully participate in recent market gains and the
short positions in a number of our hedge funds were negatively affected by the
upswing in stock prices. Looking ahead, based on our analysis of key economic
indicators, we continue to believe that our long-term views will play out to
the benefit of our investors, and that Sprott remains well positioned to build
on its history of strong performance. Despite operating in a challenging
market environment over the past year, our variable cost structure ensures
that our largest expenses are correlated with revenues, allowing us to
continue to pay dividends to our shareholders. Our balance sheet remains
solid, with a net cash position of more than $33 million and no debt."
    "We recently completed an internal reorganization, including the
introduction of the Sprott Private Wealth brand, to provide new services and
investments to our more than 2000 existing private client accounts and to
capitalize on opportunities we see in this profitable, growing segment of the
market," continued Mr. Sprott. "In addition to developing more detailed plans
for this business, we are reviewing our product lineup to identify
opportunities for new funds that either reinforce our current investment
themes or complement our existing suite of funds."

    
    Assets Under Management
    -------------------------------------------------------------------------
                                   Three       Three         Six         Six
                                  months      months      months      months
                              ended June  ended June  ended June  ended June
          $ millions            30, 2009    30, 2008    30, 2009    30, 2008
    -------------------------------------------------------------------------
    AUM, beginning of quarter      4,725       6,801       4,449       6,215
    -------------------------------------------------------------------------
    Net sales (redemptions)          (43)        259        (251)        561
    -------------------------------------------------------------------------
    Market value appreciation
     of portfolios                  (238)        666         246         950
    -------------------------------------------------------------------------
    AUM, end of quarter            4,444       7,726       4,444       7,726
    -------------------------------------------------------------------------
    

    In the second quarter of 2009, AUM decreased to $4.4 billion, compared to
$4.7 billion at March 31, 2009. The $0.3 billion decrease reflected market
value declines of $0.2 billion plus net redemptions of $0.04 billion.
    On a year-over-year basis, AUM decreased by 42% to $4.4 billion compared
to $7.7 billion at June 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 second quarter of 2009 decreased by 41.5% to $23.1
million, from $39.5 million in the second quarter of 2008. For the six months
ended June 30, 2009, total revenue was $49.7 million, a decrease of 39.8% 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 40.8% to $21.7 million, from $36.6 million in
the second quarter of 2008, as monthly average AUM decreased by approximately
36.7% over the same period. For the first half of 2009, management fees
declined by 36.2% to $44.3 million, compared to $69.4 million for the six
months ended June 30, 2008.
    Crystallized performance fees for the three- and six-month periods ended
June 30, 2009 were $0.4 million and $2.2 million, compared to $4.0 million and
$4.3 million in the prior year. In the first six months of 2008, significant
performance fees accrued by the Funds resulted in the crystallization of the
fees when the Funds were redeemed. In the first six 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 second quarter and first six
months of 2009, totaled $0.8 million and $2.9 million, respectively, compared
with a loss of $2.8 million and gain of $5.4 million for the second quarter
and first six months of 2008, respectively. The unrealized gains in the
quarter and six months of 2009 were mainly due to market appreciation of the
investments. As of June 30, 2009, proprietary investments consist of an
investment in Sprott Molybdenum Participation Corporation, investments in
various funds managed by SAM, investments purchased pursuant to the
liquidation of the Sprott Strategic Gold Master Fund Ltd., gold bullion, and
an investment in a senior secured note and related warrants.
    Other income decreased by $1.4 million to $0.2 million during the quarter
ended June 30, 2009 and declined by $3.2 million to $0.3 million for the six
months ended June 30, 2009, compared with the corresponding periods the prior
year. In the first six months of 2008, Sprott realized a foreign exchange
gains, higher early redemption fees and commission income. In the first six
months of 2009, there was a foreign exchange loss and redemption fees were
lower, resulting in a decrease in other income.
    Total expenses for the three- and six-month periods ended June 30, 2009
were $15.3 million and $31.1 million, respectively, a decrease of $7.4
million, or 32.6%, and $9.7 million, or 23.7%, compared with the corresponding
periods in 2008. The year-over-year decrease during the second quarter was
mainly attributable to a decrease in compensation and benefits of $4.2 million
and a decline in trailer fees of $3.1 million. Similarly, the decline during
the first six months of 2009 resulted mainly from a $5.6 million decrease in
trailer fees and a $5.0 million decrease in compensation and benefits,
partially offset by a $0.8 million increase in General and Administrative
expenses.
    Net income was $5.6 million ($0.04 per share) for the second quarter of
2009 and $13.0 million ($0.09 per share) in the first half of 2009, compared
with net income of $11.4 million ($0.08 per share) and $28.1 million ($0.20
per share) for the corresponding periods in 2008.

    Dividends

    On August 4, 2009 the Company declared an eligible dividend of $0.025 per
share for the quarter ended June 30, 2009. The dividend will be paid on August
28, 2009 to shareholders of record on August 13, 2009.

    Conference Call and Webcast

    A conference call and webcast will be held today, Thursday, August 6,
2009, at 10:00am EDT to discuss the Company's financial results. To access the
call, please dial 416-646-3097 or 1-866-250-4907. 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 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

                                               As at                   As at
    (In $ 000's)                       June 30, 2009       December 31, 2008
    Total Assets                              77.920                 123,430
    Total Liabilities                         14,247                  43,916
    -------------------------------------------------------------------------
    Shareholders' Equity                      63,673                  79,514
    -------------------------------------------------------------------------



    Summary Income Statement

                                 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,
    (In $ 000's, except             2009        2008        2009        2008
     per share amounts)                $           $           $           $
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue

    Management fees               21,673      36,628      44,269      69,391
    Crystallized Performance
     Fees                            405       3,992       2,215       4,297
    Unrealized and realized
     gains (losses) on
     proprietary investments         767      (2,754)      2,910       5,396
    Other income                     247       1,634         354       3,545
    -------------------------------------------------------------------------

    Total revenue                 23,092      39,500      49,748      82,629
    -------------------------------------------------------------------------
    Expenses
    Compensation and benefits      7,114      11,305      14,813      19,801
    Trailer fees                   4,831       7,948       9,420      15,056
    General and administration     2,794       2,824       5,834       5,075
    Donations                        292         366         576         691
    Amortization                     223         172         439         113
    -------------------------------------------------------------------------

    Total expenses                15,254      22,615      31,082      40,736
    -------------------------------------------------------------------------
    Income before income taxes     7,838      16,885      18,666      41,893
    Provision for income taxes     2,248       5,495       5,655      13,793
    -------------------------------------------------------------------------
    Net income and comprehensive
     income for the period         5,590      11,390      13,011      28,100

    Other expenses (1)               797         548       1,587         489
    Provision for income taxes     2,248       5,495       5,655      13,793
    -------------------------------------------------------------------------
    EBITDA                         8,635      17,433      20,253      42,382

    Unrealized and realized
     (gains) losses on
     proprietary investments        (767)      2,754      (2,910)     (5,396)
    Performance fees net of
     performance fee related
     bonus pool (2)                 (304)     (2,994)     (1,661)     (3,223)
    -------------------------------------------------------------------------

    Base EBITDA                    7,564      17,193      15,682      33,763
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net Income Per Share
     - basic                         .04         .08         .09         .20
    -------------------------------------------------------------------------
    Net Income Per Share
     -fully diluted                  .04         .08         .09         .20
    -------------------------------------------------------------------------

    (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
    





For further information:

For further information: Investor contact information: (416) 203-2310 or
(877) 403-2310 or ir@sprott.com

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