Sprott Inc. (TSX: SII) (“Sprott” or the “Company”) today announced
its financial results for the three months ended June 30, 2019.
Financial Overview (3 months
results)
- Assets Under Management (“AUM”) were $10.7 billion as at June
30, 2019, up $0.1 billion (1%) from March 31, 2019
- Total net revenues (net of commission expenses, trailer fees
and sub-advisor fees, carried interest and performance fee payouts)
were $19.3 million, reflecting a decrease of $4.2 million (18%)
from the quarter ended June 30, 2018.
- Total expenses (excluding commission expenses, trailer fees and
sub-advisor fees, carried interest and performance fee payouts)
were $17.7 million, reflecting an increase of $0.7 million (4%)
from the quarter ended June 30, 2018.
- Net income was $2.1 million ($0.01 per share), reflecting a
decrease of $3.8 million (64%) from the quarter ended June 30,
2018.
- Adjusted Base EBITDA was $9.4 million ($0.04 per share), a
decrease of $1.3 million (12%) from the quarter ended June 30,
2018
Significant Events:
- Sprott and Tocqueville Asset Management have entered into a
definitive agreement regarding the sale of Tocqueville’s gold
strategy asset management business to Sprott Asset
Management
- The acquisition is expected to close in January 2020 and will
add approximately $2.5 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
"Precious metal prices finally broke out during the second
quarter of 2019 and gained further momentum in July with the US
Federal Reserve's decision to cut interest rates for the first time
since 2008," said Peter Grosskopf, CEO of Sprott. "We believe
the macro-economic factors are in place for a new up-cycle in gold,
silver, and related equities. With more than 90% of our Assets
Under Management ("AUM") concentrated in precious metals
investments, Sprott is well-positioned to benefit from rising
metals prices and increased client interest in the sector."
"John Hathaway and his team are among the world’s most respected
gold equities managers and we have enjoyed an excellent working
relationship during the planning and launch of our joint venture
over the past year," said Whitney George, President of Sprott. "The
acquisition of the Tocqueville gold strategies is a natural
extension of that partnership, which will complement our other
resource investment and financing businesses, expand our global
footprint and allow us to service clients in all major gold
markets."
Assets Under Management (3 months
results)
In millions $ |
AUM Mar. 31, 2019 |
Net Inflows (1) |
Market Value Changes |
Other (2) |
AUM Jun. 30, 2019 |
|
Exchange Listed
Products |
|
|
|
|
|
|
|
|
|
- Physical Trusts |
7,481 |
|
(80) |
|
313 |
— |
|
7,714 |
|
|
- ETFs |
269 |
|
(3) |
|
35 |
— |
|
301 |
|
|
|
7,750 |
|
(83) |
|
348 |
— |
|
8,015 |
|
|
|
|
|
|
|
|
|
|
|
|
Lending |
731 |
|
67 |
|
(13) |
(139) |
|
646 |
|
(3) |
|
|
|
|
|
|
|
|
|
|
Managed
Equities |
|
|
|
|
|
|
|
|
|
- In-house |
594 |
|
2 |
|
(10) |
— |
|
586 |
|
|
- Sub-advised |
523 |
|
(17) |
|
5 |
— |
|
511 |
|
|
|
1,117 |
|
(15) |
|
(5) |
— |
|
1,097 |
|
|
|
|
|
|
|
|
|
|
|
|
Other |
971 |
|
(4) |
|
(54) |
— |
|
913 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
10,569 |
|
(35) |
|
276 |
(139 |
) |
10,671 |
|
|
(1) Includes net sales, called capital into our lending LPs and
uncalled committed capital for lending LPs to the extent that it
earns a commitment fee.
(2) Includes new AUM from fund acquisitions, lost AUM from fund
divestitures and lost AUM from distributions of principal receipts
to clients of our lending LPs.
(3) $1,252 million (US$957 million) of committed capital remains
uncalled, of which $301 million (US$230 million) earns a commitment
fee (AUM), and $951 million (US$727 million) does not (future
AUM).
DividendsOn August 8, 2019, a dividend of $0.03
per common share was declared for the quarter ended June 30,
2019.
Conference Call and WebcastA
conference call and webcast will be held today, August 9, 2019 at
10:00 am ET to discuss the Company's financial results and the
proposed acquisition of the Tocqueville gold strategies. To
participate in the call, please dial (855) 458-4215 ten minutes
prior to the scheduled start of the call and provide conference
ID9281589. A taped replay of the conference call will be
available until Friday, August 16, 2019 by calling (855) 859-2056,
reference number 9281589. The conference call will be webcast live
at www.sprott.com and
https://edge.media-server.com/mmc/p/6sccmw23
*Non-IFRS Financial
MeasuresThis 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 $) |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
|
|
Net income (loss) for the periods |
2,116 |
|
5,916 |
|
Adjustments: |
|
|
Interest expense |
302 |
|
15 |
|
Provision (recovery) for income taxes |
(454 |
) |
632 |
|
Depreciation and amortization |
1,097 |
|
456 |
|
EBITDA |
3,061 |
|
7,019 |
|
|
|
|
Other adjustments: |
|
|
(Gains) losses on net investments |
386 |
|
3,050 |
|
(Gains) losses on foreign exchange |
883 |
|
(236 |
) |
Non-cash stock-based compensation |
1,011 |
|
1,018 |
|
Unamortized placement fees |
— |
|
(273 |
) |
Other expenses |
4,068 |
|
437 |
|
Adjusted
EBITDA |
9,409 |
|
11,015 |
|
|
|
|
Other adjustments: |
|
|
Carried interest and performance fees |
— |
|
(685 |
) |
Carried interest and performance fee related expenses |
— |
|
356 |
|
Adjusted base EBITDA |
9,409 |
|
10,686 |
|
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) market outlook,
future metal prices and client interest in the precious
metals sector; (ii) 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
impact of the acquisition on the Company’s business and strategies;
and (iii) 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
June 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 June 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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