Sprott Announces 2018 Third Quarter Results
TORONTO, Nov. 12, 2018 (GLOBE NEWSWIRE) — 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 $||AUM
Jun. 30, 2018
& Capital Calls
Sept. 30, 2018
|Exchange Listed Products|
|- Physical Trusts||8,132||(189||) (1)||(623||)||—||7,320|
|Alternative Asset Management|
|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) 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.
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|
|Provision (recovery) for income taxes||35||3,401|
|Depreciation and amortization||457||1,473|
|(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|
|Carried interest and performance fees||—||(835||)|
|Carried interest and performance fee related expenses||—||59|
|Adjusted base EBITDA||9,707||8,007|
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.
Sprott 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.
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Investor Relations and Corporate Communications
Source: Sprott Inc.