Sprott Inc. Press Releases


Press Release

Sprott Inc. announces 2008 fourth quarter and year-end results

        TORONTO, March 26 /CNW/ - Sprott Inc. (TSX:SII) ("Sprott" or the  "Company") today announced its financial results for the quarter and year  ended December 31, 2008.Fiscal 2008 Highlights        -   Assets Under Management (AUM) were $4.4 billion as at          December 31, 2008 compared to $6.2 billion as at December 31, 2007          and $5.6 billion as at September 30, 2008      -   Management Fees were $124.0 million, an increase of $16.0 million or          15% over 2007      -   Performance Fees were $47.9 million, including $35.6 million earned          by Sprott Consulting L.P. from its management of Sprott Resource          Corporation      -   Base EBITDA was $57.1 million compared to $49.3 million in 2007          (assuming the 2008 bonus pool program had been in effect in 2007)      -   Net income was $52.1 million ($0.36 per share), versus $42.3 million          ($0.32 per share) in 2007      -   Declared a fourth quarter dividend of $0.025 per share and a special          dividend of $0.15 per share        Subsequent to Year-End        -   Planned launch of two new funds - the Sprott Gold Bullion Fund          (March 2009) and the Sprott FNSSC(1) Multi-Manager Fund (April 2009),          a Fund composed of five Sprott mutual funds, which will be          exclusively available to FNSSC members      -   Planned reorganization to separate Sprott Asset Management (SAM) into          three areas - Sprott Asset Management L.P., Sprott Private Wealth          L.P. and Sprott Consulting L.P.        (1) Federation of National Specialty Societies of Canada"Against an industry backdrop of massive net redemptions, we had net  positive sales in 2008. This is a testament to our track record of success,  loyal client base, new products and relatively strong performance from our  hedge funds," said Eric Sprott, President and CEO of Sprott Inc. "While market  declines contributed to a 28% decline in AUM year-over-year, we reported a 16%  rise in Base EBITDA and a 13% increase in earnings per share due in part to  our variable cost structure. As a result, we were able to generate strong cash  flows and pay dividends of $0.225 per share. At the end of 2008, the Company  remains financially strong with a healthy cash balance and no debt."      "The current global economic crisis is unprecedented in scale and scope,  making investment analysis unusually challenging," added Mr. Sprott. "However,  we have successfully navigated our Funds through volatile markets before to  build an impressive long-term track record, and we believe we have an  experienced team of investment professionals to do so again. Looking ahead, we  continue to build on our investment themes and trends, and to pursue our  growth initiatives. These initiatives include leveraging our investment team  to increase AUM, expanding our sales and marketing efforts, introducing new  products and capitalizing on Sprott Consulting. This vehicle has proved to be  a valuable addition to our business as evidenced by its performance fee  contribution in 2008."        Assets Under Management        For fiscal 2008, AUM decreased to $4.4 billion, compared to $6.2 billion  at December 31, 2007. Net sales were $95 million; however, market values  declined by $1.9 billion resulting in a net decrease in AUM of $1.8 billion in  2008.      The fourth quarter of 2008 saw AUM decline by $1.2 billion from $5.6  billion at September 30, 2008. The decrease reflected a combination of $0.6  billion in net redemptions and $0.6 billion in net market value depreciation.  The majority of the Company's fourth quarter redemptions related to offshore  hedge funds. A substantial portion of these funds are owned by institutional  investors, many of whom manage fund-of-fund structures which were susceptible  to a "de-leveraging" or risk reduction process. Net market value depreciation  primarily related to our domestic "long only" mutual funds.-------------------------------------------------------------------------                                                 Year ended          Year ended      $ millions                          December 31, 2008   December 31, 2007      -------------------------------------------------------------------------      AUM, beginning of period                        6,215              4,239      -------------------------------------------------------------------------      Net sales (redemptions)                            95              1,350      -------------------------------------------------------------------------      Market value appreciation       (depreciation) of portfolios                  (1,861)               626      -------------------------------------------------------------------------      AUM, end of period                              4,449              6,215      -------------------------------------------------------------------------Income Statement        Total revenues in 2008 decreased by $61.9 million, or 27%, to $165.8  million from $227.6 million in 2007. Total revenue consists of management  fees, performance fees, gains (losses) from proprietary investments, and  interest and other income.      Management fees increased by $16.0 million, or 15%, to $124.0 million  from $108.0 million in 2007, as monthly average AUM increased by approximately  22% over the same period.      Performance Fees were $47.9 million as compared to $129.2 million for the  prior year. In 2007, most of the Company's hedge funds and mutual funds  generated Performance Fees. In 2008, the global economic crisis created a  challenging investing environment and led to a significant decrease in such  fees. Of the total 2008 Performance Fees, $35.6 million was earned by Sprott  Consulting from its management of Sprott Resource Corporation, with the  remainder generated primarily by Sprott's domestic and offshore hedge funds.      As discussed in the Company's Prospectus dated May 8, 2008, SAM sold the  majority of its proprietary investments in anticipation of the initial public  offering. However, SAM retained certain investments that, on a mark-to-market  basis, resulted in a net loss from investments of $11.7 million in 2008 and  $4.2 million in 2007. In addition, Sprott reported a $7.5 million impairment  of long-term investments in 2007. These 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.      Other income increased by $3.1 million to $4.6 million compared with  2007. This increase is mainly due to early redemption fees ($2.4 million) and  foreign exchange gains ($1.5 million).      Total expenses were $86.5 million, a decrease of $88.7 million, or 51%,  compared with $175.2 million for 2007. The decrease is mainly attributable to  a decrease in compensation and benefits of $94.7 million, as a result of  higher compensation payments in 2007 as well as a change in the bonus  compensation arrangements made in 2008.      Net income was $52.1 million ($0.36 per share), compared with net income  of $42.3 million ($0.32 per share) for the corresponding period in 2007.      For the fourth quarter of 2008, total revenue was $57.7 million compared  to $163.3 million in the prior year period. Management Fees decreased by 30%  to $21.7 million primarily as a result of a 19% decline in average monthly  AUM. Performance Fees fell by $85.3 million to $42.4 million, of which $35.6  million related to fees earned by Sprott Consulting. Base EBITDA was $8.1  million. On a comparable basis, had the bonus pool program that was  implemented effective in 2008 been in effect for 2007, and everything else  remaining constant, Base EBITDA in the fourth quarter of 2007 would have been  $12.9 million. Net income was $20.4 million ($0.14 per share) in the fourth  quarter of 2008 compared to $27.6 million ($0.21 per share) in the prior year  period.        Dividends        In February 2009, a dividend of $0.025 per common share was declared for  the quarter ended December 31, 2008. In March 2009, the Company's Board of  Directors declared a special dividend of $0.15 per common share following  receipt of Performance Fees for the year ended December 31, 2008.        Conference Call and Webcast        A conference call and webcast will be held today, Thursday, March 26,  2009, at 10:30 am EDT to discuss the Company's financial results. To access  the call, please dial 416-644-3415 or 1-800-733-7560. 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  Inc. (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.Selected Annual Financial Information                                                               As at December 31                                          -------------------------------------      (In $ 000's)                                2008        2007        2006      -------------------------------------------------------------------------        Assets Under Management                4,448,708   6,215,273   4,239,291        Balance Sheet Information      -------------------------      Total Assets                             123,430     280,873     248,380      Total Liabilities                         43,916     142,785     133,374      -------------------------------------------------------------------------      Shareholders' Equity                      79,514     138,088     115,006      -------------------------------------------------------------------------        Income Statement Information      ----------------------------      Total Revenue                            165,757     227,621     198,626      -------------------------------------------------------------------------      Net Income                                52,136      42,282      34,786      -------------------------------------------------------------------------      Net Income Per Share - basic                0.36        0.32        0.27      -------------------------------------------------------------------------      Net Income Per Share - fully diluted        0.36        0.32        0.27      -------------------------------------------------------------------------            Income Statement                                                             For the     For the                                                        year ended  year ended                                                          December    December      (In $ 000's)                                        31, 2008    31, 2007      -------------------------------------------------------------------------      Revenue      Management fees                                      123,970     108,020      Performance Fees                                      47,922     129,158      Unrealized and realized losses on proprietary       investments                                         (11,722)     (4,240)      Impairment of long-term investments                        -      (7,467)      Other income                                           4,588       1,522      Interest income                                          999         628      -------------------------------------------------------------------------      Total revenue                                        165,757     227,621      -------------------------------------------------------------------------      Expenses      Compensation and benefits                             46,823     141,489      Trailer fees                                          26,491      24,415      General and administration                            11,006       6,858      Donations                                              1,651         822      Amortization                                             574         513      Interest expense                                           -       1,143      -------------------------------------------------------------------------      Total expenses                                        86,545     175,240      -------------------------------------------------------------------------      Income before income taxes                            79,212      52,381        Provision for income taxes                            27,076      10,099      -------------------------------------------------------------------------      Net income and comprehensive income for the period    52,136      42,282

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