Wrap Text
Reviewed interim results for the six months ended 31 March 2014
CORONATION FUND MANAGERS
(Incorporated in the Republic of South Africa)
Registration number: 1973/009318/06
JSE share code: CML
ISIN: ZAE000047353
('Coronation' or 'the company')
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2014
- ASSETS UNDER MANAGEMENT OF R547 BILLION
- DILUTED HEADLINE EARNINGS PER SHARE OF 275.4 CENTS
- INTERIM DIVIDEND PER SHARE OF 275 CENTS
Coronation Fund Managers produced yet another strong set of results for the six months to 31 March 2014, benefiting from the continued
strength in equity markets and strong inflows. While developed markets continued to outperform emerging markets (9.6% for the MSCI World
Index versus 1.5% for the MSCI Emerging Markets Index, both in US dollar terms), the South African equity market delivered a US dollar
return of 4.7% (10.1% in rand terms). The rand remained one of the worst performing emerging market currencies, losing 4.8% against the
US dollar and 6.6% against the euro to close at R10.54 and R14.51 respectively.
ENQUIRIES
Coronation Fund Managers: 021 680 2000
Anton Pillay, CEO: 021 680 2480
John Snalam, CFO: 021 680 2094
Capital Voice
Johannes van Niekerk: 082 921 9110
RESULTS
Continued good investment performance and a further increased asset base led to a 56% rise in revenue to R2 308 million for the six-month
period. This resulted in an increase in diluted headline earnings per share of 69% to 275.4 cents (March 2013: 163.4 cents). Profit from
fund management grew by 67% to R1 291 million (March 2013: 774 million).
BUSINESS UPDATE
The business attracted total net inflows of R14.7 billion in the half year ended 31 March 2014, including direct flows into international
products of R8.9 billion. For the period, total assets under management increased by 11% to R547 billion (September 2013: R492 billion),
of which international assets under management represent R105 billion (September 2013: R85 billion).
Coronation is a client-centric business focused on both institutional and retail markets. The institutional business offers local and
international mandates to South African and international investors, while our retail business offers a range of domestic and international
unit trust funds to local investors.
Institutional
The total institutional business recorded net outflows of R2.3 billion for the six-month period, largely as a result of the required
rebalancing of client portfolios and our SA equity and multi-asset class products being closed to new investors. The international pooled
and segregated mandates, however, attracted net positive inflows of R6 billion.
As a long-term manager, our focus is on producing consistently strong returns for clients over five years and longer. The strength of our
ability to generate alpha is best illustrated in our longest running equity portfolio, Houseview Equity. This portfolio has produced an
annualised outperformance of 3.5% (gross of fees) since inception in October 1993. In addition, our Global Absolute portfolio has delivered
alpha of 5.5% (gross of fees) per annum since inception in August 1999. With reference to the publicly available ranking tables, our domestic
and global balanced portfolios both ranked in the 1st quartile over the 5- and 10-year periods in the respective Alexander Forbes SA Large
Manager Watch and Global Large Manager Watch surveys. All returns are as at end March 2014.
Having established an excellent track record since inception in July 2008, the Coronation Global Emerging Markets Fund has outperformed its
benchmark by 8.9% p.a. (gross of fees), placing it 2nd in a global peer group of 64 funds as at end March 2014 (Source: Bloomberg data net of
fees). Equally compelling is the 11.9% annualised outperformance (gross of fees) of its benchmark by the Coronation Africa Frontiers Portfolio
since inception in October 2008.
Retail
Solid investment performance across our unit trust fund range continued to attract exceptional investor support, recording net
flows of R17 billion for the period and increasing our share of the long-term retail market to 14.5% (September 2013: 13.6%). All domestic
and international flagship funds ranked in the 1st quartile of their respective Morningstar categories since launch to end March 2014,
highlights of which include:
– Coronation Top 20 has outperformed its benchmark by a strong 6.2% p.a. (after fees) since launch in October 2000.
– Coronation Balanced Plus, the no. 1 multi-asset high equity fund in South Africa since launch in April 1996, has outperformed its
average competitor by 2.8% p.a. (after fees) over the same period.
– Coronation Capital Plus has delivered a return ahead of inflation of 8.4% p.a. (after fees) since inception in July 2001.
– Coronation Balanced Defensive, the no. 1 multi-asset low equity fund in South Africa since inception in February 2007, has outperformed
inflation by 4.8% (after fees) over the same period.
– Coronation Strategic Income, the no. 1 multi-asset income fund since inception in July 2001, has outperformed cash by an average of
2.9% p.a. (after fees) over the same period.
– Coronation Global Opportunities [ZAR] Feeder (formerly Coronation World Equity [ZAR]), has outperformed the global equity market by
1.6% p.a. (after fees) since launch in August 1997.
– Coronation Global Managed [ZAR] Feeder, the no. 1 global multi-asset high equity fund in South Africa since inception in October 2009,
has outperformed its benchmark by 1.7% (after fees) over the same period.
For the second consecutive year, Coronation was named both Raging Bull South African Management Company of the Year and Morningstar Best
Large Fund House.
INTERIM CASH DIVIDEND
We continue to reward shareholders through regular and significant distributions of free cash flow generated. We endeavour to distribute
at least 75% of after-tax cash profit. Accounting for projected cash requirements, a gross dividend for the interim period ended 31 March
2014 of 275 cents per share has been declared, resulting in a net dividend of 233.75 cents per share for shareholders subject to Dividends
Tax (DT). No STC credits are available to be utilised. In compliance with the Listings Requirements of the JSE Limited, the following dates
are applicable:
Last day to trade Friday, 6 June 2014
Shares trade ex dividend Monday, 9 June 2014
Record date Friday, 13 June 2014
Payment date Tuesday, 17 June 2014
Share certificates may not be dematerialised or rematerialised between Monday 9 June 2014 and Friday 13 June 2014, both dates inclusive.
Dividends declared after 31 March 2012 are subject to Dividends Tax (DT), where applicable. In terms of the DT, the following additional
information is disclosed:
- The local DT rate is 15%
- The number of ordinary shares in issue at the date of this declaration is 349 799 102
- Coronation’s tax reference number is 9675 107 719
OUTLOOK
The past six months mark yet another exceptional period for the business and for our clients. While equity markets have continued to be
strong, the absolute levels of return are not sustainable and we caution investors to re-set their expectations for the years ahead.
Coronation is a cyclical business and we envisage a difficult investment environment with increased market volatility.
Going forward our focus remains fixed on creating long-term value for all our stakeholders.
EXTERNAL AUDIT REVIEW
The external auditors, Ernst & Young Inc., reviewed the condensed statement of financial position of Coronation Fund Managers Limited Group
as at 31 March 2014, and the related condensed statement of comprehensive income, changes in equity and cash flows for the period then ended,
and other explanatory notes. The review has been conducted in accordance with the International Standard on Review Engagements 2410. Copies
of the unqualified report of Ernst & Young Inc. are available for inspection at the registered office of the company.
Shams Pather Anton Pillay John Snalam
Chairman Chief Executive Officer Chief Financial Officer
Cape Town
20 May 2014
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2014 2013 % 2013
R million R million Change R million
Fund management activities
Revenue 2 308 1 475 56 3 635
Other income 7 1 3
Operating expenses (1 042) (716) 46 (1 695)
Share-based payment expense (2) (1) (6)
Other expenses (1 040) (715) (1 689)
Results from operating activities 1 273 760 68 1 943
Finance and dividend income 15 11 27
Finance expense (1) – –
Share of profit of equity-accounted investee 4 3 5
Profit from fund management 1 291 774 67 1 975
Income attributable to policyholder linked assets
and investment partnerships 33 48 88
Net fair value gains on policyholder and investment
partnership financial instruments 41 67 133
Administration expenses borne by policyholders and
investors in investment partnerships (8) (19) (45)
Profit before income tax 1 324 822 61 2 063
Income tax expense (358) (250) (606)
Taxation on shareholder profits (325) (202) (518)
Taxation on policyholder investment contracts (33) (48) (88)
Profit for the period 966 572 69 1 457
Other comprehensive income (note 3)
Foreign currency translation differences for foreign operations 3 8 21
Net change in fair value of available-for-sale
financial assets 6 4 4
Net change in fair value of available-for-sale
financial assets reclassified to profit or loss – (1) (1)
Other comprehensive income for the period 9 11 24
Total comprehensive income for the period 975 583 1 481
Profit attributable to:
-equity holders of the company 965 572 69 1 455
-non-controlling interest 1 – 2
Profit for the period 966 572 1 457
Total comprehensive income attributable to:
-equity holders of the company 974 583 67 1 479
-non-controlling interest 1 – 2
Total comprehensive income for the period 975 583 1 481
Earnings per share (cents)
-basic 276.0 178.2 55 434.0
-diluted 276.0 163.4 69 416.1
Note to the statement of comprehensive income
Headline earnings per share (cents)
-basic 275.4 178.1 55 433.9
-diluted 275.4 163.4 69 416.0
Dividend per share (cents)
-interim 275.0 163.0 69 163.0
-final 253.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
31 March 31 March 30 Sept
R million 2014 2013 2013
Assets
Goodwill and intangible assets 1 088 1 088 1 088
Equipment 24 12 16
Investment in equity-accounted investees 34 32 34
Deferred tax asset 177 100 111
Investments backing policyholder funds and investments held
through investment partnerships 70 318 64 047 70 269
Investment securities 223 108 175
Trade and other receivables 733 503 946
Cash and cash equivalents 838 415 294
Total assets 73 435 66 305 72 933
Liabilities
Long-term borrowings (note 4) 150 – –
Deferred tax liabilities 100 70 78
Policyholder investment contract liabilities and liabilities to
holders of interests in investment partnerships 70 222 63 978 70 191
Income tax payable 88 87 11
Trade and other payables 776 496 646
Total liabilities 71 336 64 631 70 926
Net assets 2 099 1 674 2 007
Equity
Share capital and premium 256 256 256
Retained earnings 1 650 1 257 1 570
Reserves 188 159 177
Total equity attributable to equity holders of the company 2 094 1 672 2 003
Non-controlling interest 5 2 4
Total equity 2 099 1 674 2 007
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Restated
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
R million 2014 2013 2013
Cash flows from operating activities
Profit from fund management 1 291 774 1 975
Non-cash and other adjustments (7) (5) (17)
Operating profit before changes in working capital 1 284 769 1 958
Working capital changes 343 (195) (489)
Cash flows from policyholders and investment partnerships (3 175) 3 977 5 399
Cash (utilised)/generated from operations (1 548) 4 551 6 868
Interest paid (1) – –
Income taxes paid (310) (222) (626)
Net cash from operating activities (1 859) 4 329 6 242
Net cash from investing activities (40) 15 (41)
Cash flows from financing activities (735) (386) (955)
-dividends to shareholders (885) (386) (955)
-issue of preference shares 150 – –
Increase in cash and cash equivalents (2 634) 3 958 5 246
Net increase/(decrease) in cash and cash
equivalents – shareholders 541 (19) (153)
Net (decrease)/increase in cash and cash
equivalents – policyholders and investment partnerships (3 175) 3 977 5 399
Cash and cash equivalents at beginning of period 15 076 9 809 9 809
Cash and cash equivalents at beginning of period – shareholders 294 426 426
Cash and cash equivalents at beginning of period – policyholders
and investment partnerships 14 782 9 383 9 383
Effect of exchange rate fluctuations on cash held 3 8 21
Cash and cash equivalents at end of period 12 445 13 775 15 076
Cash and cash equivalents at end of period – shareholders 838 415 294
Cash and cash equivalents at end of period – policyholders
and investment partnerships 11 607 13 360 14 782
The 31 March 2013 cash flow comparatives have been amended to include the policyholder and investment partnership cash flows. These
amounts represent the net cash flows from contributions and withdrawals and related investing activities. Cash and cash equivalents of
policyholders and investment partnerships are not available for use by the group.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued
capital and
reserves
attributable
Share Foreign Share- to equity Non-
capital currency based Re- holders con-
and translation Retained payment valuation of the trolling Total
R million premium reserve earnings reserve reserve company interest equity
Balance at 30 September 2012
(audited) 256 21 1 070 121 5 1 473 2 1 475
Total comprehensive income for
the period
Profit for the period 572 572 572
Other comprehensive income
Currency translation differences 8 8 8
Revaluation of available-for-sale
financial assets 3 3 3
Total other comprehensive
income – 8 – – 3 11 – 11
Total comprehensive income
for the period – 8 572 – 3 583 – 583
Transactions with owners recorded
directly to equity
Share-based payments 1 1 1
Dividends paid (350) (350) (350)
Distribution to Imvula Trust
beneficiaries (35) (35) (35)
Total transactions with owners – – (385) 1 – (384) – (384)
Balance at 31 March 2013
(reviewed) 256 29 1 257 122 8 1 672 2 1 674
Total comprehensive income for
the period
Profit for the period 883 883 2 885
Other comprehensive income
Currency translation differences 13 13 13
Total other comprehensive
income – 13 – – – 13 – 13
Total comprehensive income for
the period – 13 883 – – 896 2 898
Transactions with owners
recorded directly to equity
Share-based payments 5 5 5
Dividends paid (570) (570) (570)
Total transactions with owners – – (570) 5 – (565) – (565)
Balance at 30 September 2013
(audited) 256 42 1 570 127 8 2 003 4 2 007
Total comprehensive income for
the period
Profit for the period 965 965 1 966
Other comprehensive income
Currency translation differences 3 3 3
Revaluation of available-for-sale
financial assets 6 6 6
Total other comprehensive income – 3 – – 6 9 – 9
Total comprehensive income for
the period – 3 965 – 6 974 1 975
Transactions with owners
recorded directly to equity
Share-based payments 2 2 2
Dividends paid to equity holders (885) (885) (885)
Total transactions with owners – – (885) 2 – (883) – (883)
Balance at 31 March 2014
(reviewed) 256 45 1 650 129 14 2 094 5 2 099
EARNINGS PER SHARE
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2014 2013 2013
Weighted average number of ordinary shares
in issue during the period 349 799 102 320 777 309 335 327 961
Weighted average number of ordinary shares
potentially in issue 349 799 102 349 724 973 349 761 964
R million
Earnings attributable to shareholders 966 572 1 457
Non-controlling interest (1) – (2)
Earnings attributable to ordinary shareholders 965 572 1 455
Profit on disposal of financial assets available for sale - (1) (1)
(Gain)/loss on disposal of group operations (2) 1 1
Headline earnings attributable to ordinary shareholders 963 571 1 455
Actual number of shares in issue at the end of the period 349 799 102 349 799 102 349 799 102
CONDENSED CONSOLIDATED SEGMENT REPORT
Africa
Six Restated
months Six months
reviewed reviewed Audited
31 March 31 March 30 Sept
R million 2014 2013 2013
Segment external
revenue 1 687 1 155 2 871
Segment operating
expenses (739) (558) (1 310)
Segment profit 948 597 1 561
Share of income of
equity accounted
investee 4 3 5
Net financial
income 21 12 30
Profit from fund
management 973 612 1 596 Segment
assets 1 394 889 1 172
International
Six Restated
months Six months
reviewed reviewed Audited
31 March 31 March 30 Sept
R million 2014 2013 2013
Segment external
revenue 621 320 764
Segment operating
expenses (303) (158) (385)
Segment profit 318 162 379
Share of income of
equity accounted
investee – – –
Net financial
income – – –
Profit from
fund management 318 162 379 Segment
assets 424 149 259
Group
Six Restated
months Six months
reviewed reviewed Audited
31 March 31 March 30 Sept
R million 2014 2013 2013
Segment external
revenue 2 308 1 475 3 635
Segment operating
expenses (1 042) (716) (1 695)
Segment profit 1 266 759 1 940
Share of income of
equity accounted
investee 4 3 5
Net financial
income 21 12 30
Profit from
fund management 1 291 774 1 975
Income attributable
to policyholder
linked assets and
investment
partnerships 33 48 88
Profit before
income tax 1 324 822 2 063
Segment assets 1 818 1 038 1 431
Comparatives for 31 March 2013 have been restated for international business previously reported as Africa.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation and accounting policies
The financial information has been prepared in accordance with the framework concepts and the measurements and recognition requirements
of the International Financial Reporting Standards (“IFRS”); the International Accounting Standard 34 Interim Financial Reporting; the
Listings Requirements of the JSE Limited; the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, as well as the South African Companies Act,
Act 71 of 2008. The condensed consolidated financial statements do not include all of the information required for full annual financial
statements.
These condensed consolidated financial statements have been prepared in accordance with the historical cost basis except for certain
financial instruments which are stated at fair value. The condensed consolidated financial statements are presented in rand, rounded to the
nearest million. The consolidated condensed financial statements have taken into account the requirements of IFRS 13 and the amended IAS 34,
which became effective during the current period. Other standards that have become effective have been considered and have no material
impact. The accounting policies applied in the presentation of the condensed financial statements are in terms of IFRS and, except as noted
above, are consistent with those presented in the previous annual financial statements.
These reviewed results have been prepared under the supervision of financial manager, C Martin CA(SA).
2. Related party transactions
The group, in the ordinary course of business, entered into various sale and purchase transactions on an arm’s length basis at market rates
with related parties.
3. Other comprehensive income
Other comprehensive income is available to be reclassified to profit and loss in future periods.
4. Long-term borrowings
Cumulative redeemable preference shares were issued by Coronation Investment Management (Pty) Ltd on 31 March 2014 in order to recapitalise
licensed subsidiary companies for regulatory capital adequacy requirements. Dividends, linked to prime, are payable on a quarterly basis
with capital repayment being due on 31 March 2017.
5. Fair value disclosure
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as
follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. The fair value of investment contract liabilities
are included in Level 1 since these instruments are measured with reference to the quoted prices of the investments underlying the
liabilities.
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices). The majority of Level 2 investments are deposits held with financial institutions
as well as unlisted mutual funds. The fair values are determined using a discounted cash flow valuation methodology based on market
rates, and the use of net asset values based on the quoted prices for the underlying instruments invested in by the mutual fund,
respectively.
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
R million Level 1 Level 2 Level 3 Total
March 2014
Investments backing policyholder funds and
investments held through investment partnerships 57 400 7 149 – 64 549
Investment securities 197 – 26 223
57 597 7 149 26 64 772
Policyholder and investment partnership liabilities 55 529 7 017 62 546
March 2013
Investments backing policyholder funds and investments
held through investment partnerships 51 401 8 567 – 59 968
Investment securities 88 – 20 108
51 489 8 567 20 60 076
Policyholder and investment partnership liabilities 50 239 8 471 – 58 710
September 2013
Investments backing policyholder funds and investments held
through investment partnerships 52 355 12 660 – 65 015
Investment securities 154 – 21 175
52 509 12 660 21 65 190
Policyholder and investment partnership liabilities 50 752 12 548 – 63 300
During the financial period ended 31 March 2014 there were no transfers of available-for-sale financial assets between the levels. Cash
balances of R5 471 million (March 2013: R3 716 million) have been excluded in the current and prior years respectively.
DIRECTORS
S Pather (Chairman)*, A C Pillay (CEO), J G February*, J D McKenzie*, J A Snalam (CFO), A Watson* (* Independent Non-Executive)
REGISTERED OFFICE
7th Floor, MontClare Place, Cnr Campground and Main Roads, Claremont 7708, Cape Town
POSTAL ADDRESS
PO Box 44684, Claremont 7735, Cape Town
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001
WEBSITE
www.coronation.com
SPONSOR
Deutsche Securities (SA) Proprietary Limited
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