Sprott

Press Release

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 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 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

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