Mr. Glen Williams reports
SPROTT ANNOUNCES 2018 THIRD QUARTER RESULTS
Sprott Inc. has released its financial results for the three months ended Sept. 30, 2018.
Financial overview (three-month results):
Assets under management (AUM) were $10.1-billion as at Sept. 30, 2018, compared with $11.1-billion as at June 30, 2018.Investable capital stood at $193 million as at Sept. 30, 2018, compared with $293-million as at Dec. 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 subadviser fees, carried interest, and performance fee payouts) were $15.4-million, reflecting a decrease of $31.7-million (67 per cent) from the quarter ended Sept. 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 subadviser fees, carried interest, and performance fee payouts) were $13.4-million, reflecting a decrease of $500,000 (3 per cent) from the quarter ended Sept. 30, 2017.Net income was $2.0-million (one cent per share), reflecting a decrease of $27.8-million from the quarter ended Sept. 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 (earnings before interest, taxes, depreciation and amortization) from core businesses was $9.7-million(four cents per share), an increase of $1.7-million (21 per cent) from the quarter ended Sept. 30, 2017. Taking into account last year's sale of non-core diversified assets, adjusted base EBITDA increased by $3.7-million (61 per cent) from the quarter ended Sept. 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 per cent from the third quarter of 2017 and consistent with the approximate $10-million per quarter we have been generating in 2018," said Peter Grosskopf, chief executive officer 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 on-line coin dealer, to launch a new venture called OneGold, the first dedicated online platform for investing in digital bullion."
ASSETS UNDER MANAGEMENT (THREE-MONTH RESULTS) (in millions) AUM Net sales and Acquisitions and AUM June 30, 2018 capital calls divestituresSept. 30, 2018Exchange listed productsPhysical trusts (loss)$8,132 ($189) (1)$-$7,320ETFs (loss)398 (79) - 241 8,530(268) - 7,561Alternative asset managementIn house (loss)406(4) - 376Subadvised (loss)603 (40) - 492 1,009 (44) - 868Private resource investmentsManaged companies603 -- 595Fixed term LPs 292 -- 270Separately managed accounts303 -- 279Private resource lending LPs 389 108- 493 1,587 108- 1,637Total (loss)11,126(204) -10,066 (1) Total CFCL units acquired on Jan. 16, 2018, were 252-million. For the three months ended Sept. 30, 2018, six million units ($137-million or 2 per cent) were redeemed.
Dividends
On Nov. 8, 2018, a dividend of three cents per common share was declared for the quarter ended Sept. 30, 2018.
Normal course issuer bid
Sprott is pleased to announce that the Toronto Stock Exchange 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 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 per cent of 252,675,049 (representing the number of issued and outstanding Shares as of Oct. 31, 2018). The average daily trading volume (ADTV) of the shares on the TSX for the six-month period ended Oct. 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 per cent 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 Nov. 15, 2018, and ending on Nov. 14, 2019.
To facilitate repurchases of the shares under the NCIB, Sprott has entered into an automatic repurchase plan with TD Securities Inc. 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 Nov. 15, 2017, within the past 12 months.
Conference call and webcast
A conference call and webcast will be held today, Nov. 12, 2018, at 10 a.m. Eastern Time to discuss the company's financial results. To participate in the call, please dial 855-458-4215 10 minutes prior to the scheduled start of the call and provide conference ID 1985987.A taped replay of the conference call will be available until Monday, Nov. 19, 2018, by calling 855-859-2056, reference No. 1985987. The conference call will be webcast live at the company's website.
RECONCILIATION FROM NET INCOME TO ADJUSTED BASE EBITDA (in thousands)Three months ended Sept. 30, 2018 Sept. 30, 2017Net income (loss) for the periods$1,975$29,804AdjustmentsInterest expense 26124Provision (recovery) for income taxes353,401Depreciation and amortization 4571,473EBITDA2,493 34,802Other adjustments(Gains) losses on proprietary investments 4,7653,770(Gains) losses on foreign exchange8093,648Non-cash stock-based compensation (gain)1,025 (870)Net (proceeds) from sale transaction-(33,829)Unamortized placement fees (gain)(273) 820Other expenses888442Adjusted EBITDA 9,7078,783Other adjustments Carried interest and performance fees (gain)- (835)Carried interest andperformance-fee-related expenses- 59Adjusted base EBITDA9,7078,007
About Sprott Inc.
Sprott is an alternative asset manager and a global leader in precious metal and real asset investments. Through its subsidiaries in Canada, the United States 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.
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