Sprott Inc. Q4 earnings tumble 95%

Date: Thursday, March 29, 2012
Author: The Canadian Press

Sprott Inc. (TSX: SII) says its fourth quarter net income fell 95% while revenues also slipped as it booked a big year-end hit on performance fees amid weaker precious metals prices and stock market volatility.

The Toronto-based wealth management firm said Thursday its fourth-quarter earnings were $4.6 million, or three cents per share, down from $108.6 million, or 72 cents per share, in the same 2010 period.

Revenue fell 84% to $38.1 million from $242.1 million in the prior year period.

While management fees increased slightly on a year-over-year basis to $33.7 million from $31.5 million, gross performance fees plunged to $2.5 million from $199.1 million in the fourth quarter of 2010.

Performance fees are earned on the last day of the fiscal year. As a result, the fourth-quarter is significantly more volatile than other quarters.

The company booked an impairment charge of $7.7 million after determining the carrying value of the fund's management contracts and carried interests exceeded their recoverable amounts.

It also took a $2 million loss on unrealized proprietary investments, compared to a $5.6 million gain in the prior year quarter.

The fund had $9.14 billion in assets under management at the end of the fourth quarter, up from $8.5 billion in the year-earlier quarter.

For the full year, net income was 33 million, or 20 cents per share, down 75% from $132.7 million, or 88 per share.

"In 2011, the sovereign debt crisis led to unprecedented volatility and central bank intervention in the financial markets," said Peter Grosskopf, CEO of Sprott Inc.

"Our funds were defensively positioned throughout the year. However, weakening prices in precious metals and, particularly, their related equities, negatively impacted our investment results and performance fee generation."

Sprott also owns Sprott Consulting, a business that provides consulting services to its spinoffs Sprott Resource Corp. (TSX:SCP), Sprott Resource Lending Corp. (TSX:SIL) and Sprott Power Corp. Sprott U.S. Holdings provides specialized broker services and asset management in the natural resource sector.