Sprott Inc. (TSX: SII) (“Sprott” or the “Company”) today announced
its financial results for the three months ended September 30,
2019.
Financial Overview (3 months
results)
- Assets Under Management (“AUM”) were $11.3 billion as at
September 30, 2019, up $0.7 billion (6%) from June 30, 2019
- Total net revenues (net of commission expenses, trailer fees
and sub-advisor fees, carried interest and performance fee payouts)
were $23.2 million, reflecting an increase of $7.7 million (50%)
from the quarter ended September 30, 2018.
- Total expenses (excluding commission expenses, trailer fees and
sub-advisor fees, carried interest and performance fee payouts)
were $15.5 million, reflecting an increase of $2.1 million (15%)
from the quarter ended September 30, 2018.
- Net income was $5.7 million ($0.02 per share), reflecting an
increase of $3.7 million from the quarter ended September 30,
2018.
- Adjusted Base EBITDA was $10.0 million ($0.04 per share), an
increase of $0.3 million (4%) from the quarter ended September 30,
2018
Significant Events:
- Sprott and Tocqueville Asset Management entered into a
definitive agreement regarding the sale of Tocqueville’s gold
strategy assets to Sprott Asset Management
- The acquisition is expected to close in January 2020 and will
add approximately $2.2 billion to Sprott's AUM
- Lead Portfolio Manager John Hathaway and Portfolio Managers
Douglas Groh and Ryan McIntyre will join Sprott upon closing of the
transaction
"Strong precious metals prices and improved
investor sentiment contributed to increases in our AUM and Adjusted
Base EBITDA during the third quarter of 2019," said Peter
Grosskopf, CEO of Sprott. "In the current climate of artificially
low interest rates and accommodative monetary policy, we believe
precious metals have become a mandatory portfolio diversification
asset. The acquisition of the Tocqueville gold strategies will add
meaningful scale to Sprott's managed equities segment and provide
additional operating leverage to the gold price going forward."
Assets Under Management (3 months
results)
|
(In millions $) |
|
AUM Jun. 30, 2019 |
Net Inflows (1) |
Market Value Changes |
Other (2) |
AUM Sep. 30, 2019 |
|
Exchange Listed Products |
|
|
|
|
|
|
|
|
|
|
|
|
- Physical Trusts |
|
7,714 |
|
92 |
570 |
— |
8,376 |
|
|
|
- ETFs |
|
301 |
|
4 |
9 |
— |
314 |
|
|
|
|
|
8,015 |
|
96 |
579 |
— |
8,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lending |
|
646 |
|
53 |
12 |
(125) |
586 |
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed
Equities |
|
|
|
|
|
|
|
|
|
|
|
|
- In-house |
|
586 |
|
2 |
4 |
— |
592 |
|
|
|
- Sub-advised |
|
511 |
|
(10) |
34 |
— |
535 |
|
|
|
|
|
1,097 |
|
(8) |
38 |
— |
1,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
913 |
|
— |
11 |
— |
924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
10,671 |
|
141 |
640 |
(125) |
11,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
See 'Net Inflows' in the key performance indicators (non-IFRS
financial measures) section of the MD&A |
|
|
|
|
|
|
|
|
|
|
|
(2) |
Includes new AUM from fund acquisitions and lost AUM from fund
divestitures and capital distributions of our lending LPs. |
|
|
|
|
|
|
|
|
|
|
|
(3) |
$1,311 million (US$990 million) of committed capital remains
uncalled, of which $277 million (US$209 million) earns a commitment
fee (AUM), and $1,034 million (US$781 million) does not (future
AUM). |
Dividends
On November 7, 2019, a dividend of $0.03 per
common share was declared for the quarter ended September 30,
2019.
Normal Course Issuer Bid
Sprott Inc. (TSX:SII) (“Sprott”) is pleased to
announce that the Toronto Stock Exchange ("TSX") has approved the
notice of its intention to make a normal course issuer bid
("NCIB"). Pursuant to the terms of the NCIB, Sprott may purchase
its own common shares (the "Shares") for cancellation through the
facilities of the TSX at the prevailing market price of the Shares.
It is expected that the maximum number of Shares which may be
purchased by Sprott during the NCIB will not exceed 6,345,112 being
approximately 2.5% of 253,804,511 (representing the number of
issued and outstanding Shares as of October 31, 2019). The average
daily trading volume (the "ADTV") of the Shares on the TSX for the
six-month period ended October 31, 2019 was 281,130. Under the
rules of the TSX, Sprott is entitled to repurchase during the same
trading day on the TSX up to 25% of the ADTV of the Shares, being
70,282 Shares, except where such purchases are made in accordance
with the "block purchase" exemption under applicable TSX policy.
Sprott will effect purchases at varying times commencing on
November 15, 2019 and ending on November 14, 2020.
In addition to providing shareholders liquidity,
Sprott believes that the Shares have been trading in a price range
which does not adequately reflect the value of such shares in
relation to Sprott’s business and its future prospects.
Under its prior NCIB that commenced on November
15, 2018 and was suspended in November 2019, Sprott previously
sought and received approval from the TSX to repurchase up to
12,633,752 Shares. Sprott did not purchase any Shares pursuant to
its previously authorized NCIB.
Conference Call and Webcast
A conference call and webcast will be held
today, November 8, 2019 at 9:00 am ET to discuss the Company's
financial results for the third quarter of 2019. To participate in
the call, please dial (855) 458-4215 ten minutes prior to the
scheduled start of the call and provide conference ID3763979.
A taped replay of the conference call will be available until
Friday, November 15, 2019 by calling (855) 859-2056, reference
number 3763979. The conference call will be webcast live at
www.sprott.com and https://edge.media-server.com/mmc/p/x5a4k34g
*Non-IFRS Financial
Measures
This press release includes financial terms
(including AUM, investable capital, net revenues, expenses,
adjusted base EBITDA and net sales) that the Company utilizes to
assess the financial performance of its business that are not
measures recognized under International Financial Reporting
Standards (“IFRS”). These non-IFRS measures should not be
considered alternatives to performance measures determined in
accordance with IFRS and may not be comparable to similar measures
presented by other issuers. For additional information regarding
the Company's use of non-IFRS measures, including the calculation
of these measures, please refer to the “Non-IFRS 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.
A reconciliation from net income to adjusted
base EBITDA is shown below:
|
3 months ended |
(in thousands $) |
Sept. 30, 2019 |
|
Sept. 30, 2018 |
|
|
|
|
Net income (loss) for
the periods |
5,723 |
|
1,975 |
|
Adjustments: |
|
|
Interest expense |
393 |
|
26 |
|
Provision (recovery) for income taxes |
1,945 |
|
35 |
|
Depreciation and amortization |
1,180 |
|
457 |
|
EBITDA |
9,241 |
|
2,493 |
|
|
|
|
Other adjustments: |
|
|
(Gains) losses on net investments (1) |
(791 |
) |
4,765 |
|
(Gains) losses on foreign exchange |
(426 |
) |
809 |
|
Non-cash stock-based compensation |
1,597 |
|
1,025 |
|
Unamortized placement fees (2) |
— |
|
(273 |
) |
Other expenses(3) |
428 |
|
888 |
|
Adjusted
EBITDA |
10,049 |
|
9,707 |
|
|
|
|
Other adjustments: |
|
|
Carried interest and performance fees |
— |
|
— |
|
Carried interest and performance fee related expenses |
— |
|
— |
|
Adjusted base EBITDA |
10,049 |
|
9,707 |
|
(1) This adjustment removes the income
effects of certain gains or losses on proprietary and long-term
investments to ensure the reporting objectives of our EBITDA metric
are met.
(2) The prior period comparative figures
contained a placement fee amortization adjustment to ensure the
2018 results were comparable to 2017 in light of the 2018 adoption
of IFRS 15.
(3) See Other expenses in Note 6 of the
interim financial statements. In addition to the items outlined in
Note 6, Other expenses also includes severance and new hire
accruals of $0.2 million for the 3 months ended (3
months ended September 30, 2018 - $0.4 million).
Forward Looking
StatementsCertain statements in this press release contain
forward-looking information (collectively referred to herein as the
"Forward-Looking Statements") within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "may", "will", "project",
"should", "believe", "plans", "intends" and similar expressions are
intended to identify Forward-Looking Statements. In particular, but
without limiting the forgoing, this press release contains
Forward-Looking Statements pertaining to: (i) market outlook and
future metal prices; (ii) precious metals becoming a mandatory
portfolio diversification asset; (iii) the acquisition of the
Tocqueville gold strategies asset management business, including
that the acquisition will be completed and the timing thereof, the
AUM to be added as a result of the acquisition, certain portfolio
managers joining Sprott upon the completion of the acquisition and
the ability of the acquisition to add meaningful scale to Sprott's
managed equities segment and provide additional operating leverage
to the gold price going forward; (iv) future purchases by Sprott of
the Shares pursuant to the NCIB; and (v) the declaration, payment
and designation of dividends.
Although the Company believes that the
Forward-Looking Statements are reasonable, they are not guarantees
of future results, performance or achievements. A number of factors
or assumptions have been used to develop the Forward-Looking
Statements, including, without limitation: (i) the impact of
increasing competition in each business in which the Company
operates will not be material; (ii) quality management will be
available; (iii) the effects of regulation and tax laws of
governmental agencies will be consistent with the current
environment; and (iv) those assumptions disclosed under the heading
"Significant Accounting Judgments, Estimates and Changes in
Accounting Policies" in the Company’s MD&A for the period ended
September 30, 2019. Actual results, performance or achievements
could vary materially from those expressed or implied by the
Forward-Looking Statements should assumptions underlying the
Forward-Looking Statements prove incorrect or should one or more
risks or other factors materialize, including: (i) difficult market
conditions; (ii) poor investment performance; (iii) failure to
continue to retain and attract quality staff; (iv) employee errors
or misconduct resulting in regulatory sanctions or reputational
harm; (v) performance fee fluctuations; (vi) a business segment or
another counterparty failing to pay its financial obligation; (vii)
failure of the Company to meet its demand for cash or fund
obligations as they come due; (viii) changes in the investment
management industry; (ix) failure to implement effective
information security policies, procedures and capabilities; (x)
lack of investment opportunities; (xi) risks related to regulatory
compliance; (xii) failure to manage risks appropriately; (xiii)
failure to deal appropriately with conflicts of interest; (xiv)
competitive pressures; (xv) corporate growth which may be difficult
to sustain and may place significant demands on existing
administrative, operational and financial resources; (xvi) failure
to comply with privacy laws; (xvii) failure to successfully
implement succession planning; (xviii) foreign exchange risk
relating to the relative value of the U.S. dollar; (xix) litigation
risk; (xx) failure to develop effective business resiliency plans;
(xxi) failure to obtain or maintain sufficient insurance coverage
on favourable economic terms; (xxii) historical financial
information being not necessarily indicative of future performance;
(xxiii) the market price of common shares of the Company may
fluctuate widely and rapidly; (xxiv) risks relating to the
Company’s investment products; (xxv) risks relating to the
Company's proprietary investments; (xxvi) risks relating to the
Company's lending business; (xxvii) risks relating to the Company’s
merchant bank and advisory business; (xxviii) those risks described
under the heading "Risk Factors" in the Company’s annual
information form dated February 27, 2019; and (xxix) those risks
described under the headings "Managing Risk: Financial" and
"Managing Risk: Non-Financial" in the Company’s MD&A for the
period ended September 30, 2019. There are also risks that are
inherent in the nature of a transaction such as the acquisition of
the Tocqueville gold strategies asset management business,
including: failure to realize anticipated synergies; risks
regarding integration; incorrect assessments of the values of the
acquired assets; and failure to obtain any required security
holder, regulatory, stock exchange and other approvals (or to do so
in a timely manner). The anticipated timeline for completion of the
acquisition of the Tocqueville gold strategies asset management
business may change for a number of reasons, including the
inability to secure necessary security holder, regulatory, stock
exchange and other approvals in the time assumed or the need for
additional time to satisfy the conditions to the completion of the
acquisition. As a result of the foregoing, readers should not place
undue reliance on the forward-looking statements contained in this
press release concerning the completion of the acquisition or the
timing thereof. In addition, the payment of dividends is not
guaranteed and the amount and timing of any dividends payable by
the Company will be at the discretion of the Board of Directors of
the Company and will be established on the basis of the Company’s
earnings, the satisfaction of solvency tests imposed by applicable
corporate law for the declaration and payment of dividends, and
other relevant factors. The Forward-Looking Statements speak only
as of the date hereof, unless otherwise specifically noted, and the
Company does not assume any obligation to publicly update any
Forward-Looking Statements, whether as a result of new information,
future events or otherwise, except as may be expressly required by
applicable Canadian securities laws.
About SprottSprott is an
alternative asset manager and a global leader in precious metal and
real asset investments. Through its subsidiaries in Canada,
the US and Asia, the Corporation is dedicated to providing
investors with best-in-class investment strategies that include
Exchange Listed Products, Lending, Managed Equities and Brokerage.
Sprott is based in Toronto with offices in New
York, Carlsbad and Vancouver and its common
shares are listed on the Toronto Stock Exchange under the
symbol (TSX:SII). For more information, please
visit www.sprott.com.
Investor contact
information:Glen WilliamsManaging DirectorInvestor
Relations and Corporate Communications(416)
943-4394gwilliams@sprott.com
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