SII Sprott Inc

TORONTO, Aug. 7, 2014 /CNW/ - Sprott Inc. (TSX: SII) ("Sprott" or the "Company") today announced its financial results for the three months ended June 30, 2014.

 Q2 2014 Financial Overview

• Assets Under Management ("AUM") were $7.8 billion as at June 30, 2014, compared to $7.1 billion as at June 30, 2013 and $7.7 billion as at March 31, 2014
• Assets Under Administration ("AUA") were $2.6 billion as at June 30, 2014, compared to $2.6 billion as at June 30, 2013 and $2.7 billion as at March 31, 2014
• Management Fees were $20.1 million, reflecting a decrease of $1.3 million (6.3)% from the three months ended June 30, 2013
• Commission revenues were $2.5 million reflecting an increase of $0.9 million (54.7%) from the three months ended June 30, 2013
• Invested capital stood at $330.5 million, reflecting a $16.3 million (5.2%) increase from December 31, 2013
• Returns on invested capital were $6.5 million during the second quarter of 2014
  • Interest income was $3.8 million, reflecting an increase of $2.8 million from the three months ended June 30, 2013
  • Unrealized and realized gains on proprietary investments and loans were $2.7 million, reflecting an increase of $12.1 million from the three months ended June 30, 2013
• Adjusted base EBITDA was $6.8 million, reflecting a decrease of $1.2 million (14.6%) from the three months ended June 30, 2013
• Net income was $5.0 million ($0.02 per share), reflecting an increase of $11.7 million from the three months ended June 30, 2013

Significant events for the three months ended June 30, 2014 and year-to-date 2014:

• Acquired three real assets focused funds sub-advised by Capital Innovations LLC and launched Sprott Real Assets Class
• Launched Sprott Gold Miners ETF on the New York Stock Exchange
• Signed agreement with Bridging Finance Inc. to sub-advise the Sprott Bridging Income Fund LP
• Completed secondary offering of 23 million shares previously held by a company controlled by Eric Sprott and announced proposed private placement of an additional five million shares to the Sprott employee trust

"Our fund performance continued to improve during the second quarter and first half of 2014, with many of our funds posting solid double-digit returns year-to-date," said Peter Grosskopf, Chief Executive Officer of Sprott. "We have now generated positive net sales for four straight quarters and we are gradually building momentum in a number of different areas."

"We continue to broaden our product offerings to provide investors with a wider range of investment options, focusing on areas where our expertise gives us a sustainable competitive advantage," continued Mr. Grosskopf. "Earlier this year, we acquired three real assets funds sub-advised by Capital Innovations LLC, focused on infrastructure, agriculture and timber. We subsequently launched the Sprott Real Assets Class, a new fund that provides investors with access to all three funds through a single investment solution."

"In July, we launched the Sprott Gold Miners ETF ("SGDM") on the New York Stock Exchange. The ETF leverages our extensive experience as gold investors and is based on a proprietary, factors-based methodology," added Mr. Grosskopf. "While it will take time to measure the success of the fund, we believe this could be a key growth area for our business. Along with our three physical trusts, this latest offering gives us four NYSE-listed investment funds that are easily accessible to US and international investors."

The breakdown of AUM by investment product type on a quarter-over-quarter basis is as follows:

Assets Under Management

AUM at June 30, 2014, increased by 9.7% to $7.8 billion from $7.1 billion at June 30, 2013. Net sales for the three months ended June 30, 2014 were $0.1 billion. Average AUM for the three months ended June 30, 2014 was $7.6 billion compared with $8.0 billion for the three months ended June 30, 2013, a decrease of 5.1%. During the quarter performance gains and net sales were offset somewhat by Sprott Toscana's strategic decision to exit the resource lending business to focus on Toscana Energy Income Corp., a business that invests in mid-long-life oil and gas properties, working interests and royalties.

Income Statement

Total revenues for the three months ended June 30, 2014 increased by 83.2% to $30.4 million from $16.6 million for the three months ended June 30, 2013.

For the three months ended June 30, 2014, Management Fees decreased by 6.3% to $20.1 million from $21.5 million in the three months ended June 30, 2013, reflecting the decline in average AUM over the period. 

Commission revenue was $2.5 million reflecting an increase of $0.9 million (54.7%) from the three months ended June 30, 2013. Commission revenue is generated primarily through private placements by Sprott Global Resource Investments Ltd., and to a lesser extent, Sprott Private Wealth.

Interest income was $3.8 million, reflecting an increase of $2.8 million from the prior period.  Interest income earned by the Company is generated primarily by Sprott Resource Lending Corp., which was acquired by the Company on July 23, 2013.

Unrealized and realized gains on proprietary investments and loans were $2.7 million, reflecting an increase of $12.1 million from the prior period.

Other income decreased by $1.0 million from $1.9 million in the three months ended June 30, 2013 to $0.8 million in the three months ended June 30, 2014.

Total expenses were $22.7 million, reflecting a decrease of $4.0 million (15.0%) from the prior period. 

Adjusted base EBITDA was $6.8 million, reflecting a decrease of $1.2 million (14.6%) from the prior period. 

Net Income was $5.0 million, reflecting an increase of $11.7 million from the prior period. 

Basic earnings per share were $0.02, versus $(0.04) for the prior period. Diluted earnings per share were $0.02, versus $(0.04) for the prior period.

Dividends

On May 13, 2014, a dividend of $0.03 per common share was declared for the quarter ended March 31, 2014. On August 6, 2014, a dividend of $0.03 per common share was declared for the quarter ended June 30, 2014.

Conference Call and Webcast

A conference call and webcast will be held today, Thursday. August 7, 2014 at 10:00am ET to discuss the Company's financial results. To participate in the call, please dial 647-427-7450 or 1-888-231-8191 and provide conference ID 81176731 ten minutes prior to the scheduled start of the call. A taped replay of the conference call will be available until Thursday, August 14, 2014 by calling 416-849-0833 or 1-855-859-2056, reference number 81176731. The conference call will be webcast live at www.sprottinc.com and www.newswire.ca

*Non-IFRS Financial Measures

This press release includes financial terms (including AUM, AUA, 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.

Forward-Looking Information and 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 continued broadening of product offerings to provide investors a wider range of investment options, focusing on areas where Sprott's expertise gives it a sustainable competitive advantage; (ii) the belief that the SGDM could be a key growth area for the business; 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: (i) future exchange rates will remain consistent with the current environment; (ii) the price of precious metals will increase; (iii) the resource sector will recover; (iv) the impact of increasing competition in each business in which the Company operates will not be material; (v) quality management will be available; and (vi) the effects of regulation and tax laws of governmental agencies will be consistent with the current environment.   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) changes in the investment management industry; (iii) risks related to regulatory compliance; (iv) failure to deal appropriately with conflicts of interest; (v) failure to continue to retain and attract quality staff; (vi) competitive pressures; (vii) corporate growth may be difficult to sustain and may place significant demands on existing administrative, operational and financial resources; (viii) foreign exchange risk relating to the relative value of the U.S. dollar; (ix) historical financial information is not necessarily indicative of future performance; * those risks described under the heading "Risk Factors" in the Company's annual information form dated March 27, 2014; and (xi) those risks described under the headings "Managing Risk - Financial" and "Managing Risk - Other" in the Company's MD&A for the three and six months ended June 30, 2014.  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 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 primarily through six business units: Sprott Asset Management LP, Sprott Private Wealth LP, Sprott Consulting LP, Sprott Resource Lending Corp., Sprott Toscana and Sprott U.S. Holdings Inc.  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 and Sprott Toscana provide management, administrative and consulting services to other companies. Sprott Resource Lending provides lending services to mining and energy sectors. Sprott U.S. Holdings Inc. includes Sprott Global Resource Investments Ltd, Sprott Asset Management USA Inc., and Resource Capital Investments Corporation. Sprott Inc. is headquartered in Toronto, Canada, and is listed on the Toronto Stock Exchange under the symbol "SII". For more information on Sprott Inc., please visit www.sprottinc.com.

SOURCE Sprott Inc.