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 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
(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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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

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