Sprott Inc. (TSX: SII) (“Sprott” or the “Company”) today announced
its financial results for the three months ended September 30,
2018.
Financial Overview (3 months
results)
- Assets Under Management (“AUM”)
were $10.1 billion as at September 30, 2018, compared to $11.1
billion as at June 30, 2018.
- Investable capital stood at $193
million as at September 30, 2018, compared to $293 million as
at December 31, 2017, reflecting a decrease of $101 million,
due primarily to the purchase of Central Fund of Canada assets in
January of this year.
- Total net revenues (net of
commission expenses, trailer fees and sub-advisor fees, carried
interest and performance fee payouts) were $15.4 million,
reflecting a decrease of $31.7 million (67%) from the quarter ended
September 30, 2017. Last year's net revenues contained $33.8
million of proceeds from the sale of our non-core diversified
assets.
- Total expenses (excluding
commission expenses, trailer fees and sub-advisor fees, carried
interest and performance fee payouts) were $13.4 million,
reflecting a decrease of $0.5 million (3%) from the quarter ended
September 30, 2017.
- Net income was $2.0 million ($0.01
per share), reflecting a decrease of $27.8 million from the quarter
ended September 30, 2017. Last year's net income contained the
proceeds from the sale of our non-core diversified assets as well
as its earnings generation for one month of that quarter.
- Adjusted Base EBITDA from core
businesses was $9.7 million ($0.04 per share), an increase of
$1.7 million (21%) from the quarter ended September 30, 2017.
Taking into account last year's sale of non-core diversified
assets, adjusted base EBITDA increased by $3.7 million (61%) from
the quarter ended September 30, 2017.
"Despite a pullback in precious metal prices, we
reported $9.7 million of adjusted base EBITDA during the quarter,
an increase of more than 21% from the third quarter of 2017 and
consistent with the approximate $10 million per quarter we have
been generating in 2018," said Peter Grosskopf, CEO of Sprott. "We
are focused on delivering profitable growth and expect to
significantly increase the scale of our private lending business
before the end of 2018. We are also exploring new product launches
in our exchange-listed products business."
"Sprott is committed to being at the forefront
of technological innovation in the sector and has made two
investments in fintech companies using blockchain technology to
digitize gold," added Mr. Grosskopf. "In addition, we are now
pleased to announce that Sprott has partnered with APMEX, Inc.,
North America's largest online coin dealer, to launch a new venture
called OneGold, the first dedicated online platform for investing
in digital bullion."
Assets Under Management (3 months
results)
In millions $ |
AUMJun. 30, 2018 |
Net Sales& Capital Calls |
MarketValue Change |
Acquisitions& Divestitures |
AUMSept. 30, 2018 |
Exchange Listed
Products |
|
|
|
|
|
- Physical Trusts |
8,132 |
|
(189 |
) (1) |
(623 |
) |
— |
|
7,320 |
|
-
ETFs |
398 |
|
(79 |
) |
(78 |
) |
— |
|
241 |
|
|
8,530 |
|
(268 |
) |
(701 |
) |
— |
|
7,561 |
|
Alternative Asset
Management |
|
|
|
|
|
-
In-house |
406 |
|
(4 |
) |
(26 |
) |
— |
|
376 |
|
-
Sub-advised |
603 |
|
(40 |
) |
(71 |
) |
— |
|
492 |
|
|
1,009 |
|
(44 |
) |
(97 |
) |
— |
|
868 |
|
Private Resource
Investments |
|
|
|
|
|
- Managed
Companies |
603 |
|
— |
|
(8 |
) |
— |
|
595 |
|
- Fixed
Term LPs |
292 |
|
— |
|
(22 |
) |
— |
|
270 |
|
-
Separately Managed Accounts |
303 |
|
— |
|
(24 |
) |
— |
|
279 |
|
- Private
Resource Lending LPs |
389 |
|
108 |
|
(4 |
) |
— |
|
493 |
|
|
1,587 |
|
108 |
|
(58 |
) |
— |
|
1,637 |
|
Total |
11,126 |
|
(204 |
) |
(856 |
) |
— |
|
10,066 |
|
(1) Total CFCL units acquired on January 16, 2018 were 252
million. For the 3 months ended September 30, 2018, 6 million units
($137 million or 2%) were redeemed.
Dividends
On November 8, 2018, a dividend of $0.03 per
common share was declared for the quarter ended September 30,
2018.
Normal Course Issuer Bid
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 12,633,752, being approximately 5% of
252,675,049 (representing the number of issued and outstanding
Shares as of October 31, 2018). The average daily trading volume
(the "ADTV") of the Shares on the TSX for the six-month period
ended October 31, 2018 was 403,474. 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 100,868 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, 2018 and
ending on November 14, 2019.
To facilitate repurchases of the Shares under
the NCIB, Sprott has entered into an automatic repurchase plan with
TD Securities Inc. (the "Broker"). The automatic repurchase plan
allows for purchases by the Company of the Shares when the Company
would ordinarily be prevented from making purchases due to
regulatory restriction or self-imposed blackout periods. Purchases
will be made by the Broker based upon the parameters prescribed by
the TSX and the terms of the parties' written agreement.
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 the Company's business and its future prospects. As a
result, Sprott believes that its outstanding Shares may represent
an attractive investment.
Sprott did not purchase any securities pursuant
to its previously authorized NCIB, which commenced on November 15,
2017, within the past 12 months.
Conference Call and Webcast
A conference call and webcast will be held
today, November 12, 2018 at 10:00 am ET to discuss the Company's
financial results. To participate in the call, please dial (855)
458-4215 ten minutes prior to the scheduled start of the call and
provide conference ID1985987. A taped replay of the
conference call will be available until Monday, November 19, 2018
by calling (855) 859-2056, reference number 1985987. The conference
call will be webcast live at www.sprott.com and
https://edge.media-server.com/m6/p/35ysaejp
*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,
2018 |
|
Sept. 30,
2017 |
|
|
|
|
Net income
(loss) for the periods |
1,975 |
|
29,804 |
|
Adjustments: |
|
|
Interest
expense |
26 |
|
124 |
|
Provision
(recovery) for income taxes |
35 |
|
3,401 |
|
Depreciation and amortization |
457 |
|
1,473 |
|
EBITDA |
2,493 |
|
34,802 |
|
|
|
|
Other adjustments: |
|
|
(Gains)
losses on proprietary investments |
4,765 |
|
3,770 |
|
(Gains)
losses on foreign exchange |
809 |
|
3,648 |
|
Non-cash
stock-based compensation |
1,025 |
|
(870 |
) |
Net
proceeds from Sale Transaction |
— |
|
(33,829 |
) |
Unamortized placement fees |
(273 |
) |
820 |
|
Other expenses(1) |
888 |
|
442 |
|
Adjusted
EBITDA |
9,707 |
|
8,783 |
|
|
|
|
Other adjustments: |
|
|
Carried
interest and performance fees |
— |
|
(835 |
) |
Carried interest and performance fee related expenses |
— |
|
59 |
|
Adjusted base EBITDA |
9,707 |
|
8,007 |
|
Forward-Looking Statements
Certain 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) the Company’s focus
on delivering profitable growth and its expectation that it will
significantly increase the scale of its private lending business
before the end of 2018; (ii) exploration of new product launches in
the Company’s exchange-listed products business; (iii) Sprott is
committed to being at the forefront of technological innovation in
the sector; (iv) the launch of a new venture called OneGold; (v)
future purchases by Sprott of the Shares pursuant to the NCIB; and
(vi) 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: (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
herein under the heading "Significant Accounting Judgments and
Estimates" in the Company’s MD&A for the period ended September
30, 2018. 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 could result in regulatory sanctions or reputational
harm; (v) performance fee fluctuations; (vi) changes in the
investment management industry; (vii) failure to implement
effective information security policies, procedures and
capabilities; (viii) lack of investment opportunities; (ix) risks
related to regulatory compliance; (x) failure to manage risks
appropriately; (xi) failure to deal appropriately with conflicts of
interest; (xii) competitive pressures; (xiii) corporate growth may
be difficult to sustain and may place significant demands on
existing administrative, operational and financial resources; (xiv)
failure to successfully implement succession planning; (xv) foreign
exchange risk relating to the relative value of the U.S. dollar;
(xvi) litigation risk; (xvii) failure to develop effective business
resiliency plans; (xviii) failure to obtain or maintain sufficient
insurance coverage on favourable economic terms; (xix) historical
financial information is not necessarily indicative of future
performance; (xx) the market price of common shares of the Company
may fluctuate widely and rapidly; (xxi) risks relating to the
Company’s investment products; (xxii) risks relating to the
Company's proprietary investments; (xxiii) risks relating to the
Company's lending business; (xxiv) risks relating to the Company’s
merchant bank and advisory business; (xxv) those risks described
under the heading "Risk Factors" in the Company’s annual
information form dated March 2, 2018; and (xxvi) 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, 2018. 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, Alternative Asset Management and Private
Resource Investments. The Corporation also operates Merchant
Banking and Brokerage businesses in both Canada and the
US. 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
Source: Sprott Inc.
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