Wrap Text
Reviewed preliminary financial results for the year ended 30 September 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 PRELIMINARY CONDENSED FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2014
- Assets under management of R588 billion, up 20%
- Diluted headline earnings per share of 571.6 cents, up 37%
- Total dividend per share of 571 cents
Long-term investment house Coronation Fund Managers delivered a good set of results for the 12 months to 30 September 2014.
Strong investment performance was supported by a positive market environment for a large part of the year. However, in the month
of September, equity markets sold off as commodity prices plummeted and emerging markets fell sharply. For the financial year,
the MSCI World Index returned 12.8%, while the MSCI Emerging Markets Index delivered 4.7% (both in US dollar terms). The South
African equity market produced a US dollar return of 2.6% over the same period, amounting to 15.4% in rand terms. Continuing
its decline, the rand lost 11% against the US dollar (to close at R11.28) and 4.8% against the euro (to close at R14.24). The
domestic currency remained among the worst performing emerging market currencies over the period.
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
The substantially increased asset base, combined with good investment performance, assisted in generating a 31% rise in revenue
to R4.8 billion for the financial year. This resulted in an increase in profit from fund management of 35% to R2.7 billion and
diluted headline earnings per share of 37% to 571.6 cents (September 2013: 416.0 cents).
BUSINESS UPDATE
Coronation is a cyclical business with a proven investment philosophy and impressive long-term track record. For the year, assets
under management increased by 20% to R588 billion (September 2013: R492 billion), supported by total net inflows of R32 billion.
In line with our strategy to further grow the global franchise, international products represented 66% (R21 billion) of this
inflow. Total international assets under management grew by 49% to R127 billion (September 2013: R85 billion). Key highlights
from our primary client market segments, institutional and retail, are included below.
Institutional
Net flows into our institutional business were close to zero, with inflows to our Emerging Market product countering outflows
from our mature South African business. Investors should expect our domestic institutional business to continue to experience
outflows, given our strategic decision to close the SA Equity product range and the Balanced and Absolute Return range to new
clients in 2012.
Our long-term track record is evident in the 1st quartile rankings achieved over all meaningful periods by virtually all our
products. We consider meaningful periods of performance to be in excess of five years. Our balanced funds have consistently
delivered top-quartile performance over meaningful periods in the Alexander Forbes SA Large and Global Large Manager Watch
surveys and our longest-running domestic equity fund, Houseview Equity, has delivered an annualised alpha of 3.2% (gross of fees)
since its inception in October 1993. Our first-to-market absolute portfolio, Global Absolute, has produced alpha of 5.3% p.a.
(gross of fees) since inception in August 1999. Finally our specialist bond portfolio, Strategic Bond, has outperformed the local
bond market by 1.7% p.a. (gross of fees) since inception in January 2008.
Managed from Cape Town, our Emerging Market and Africa products have continued to produce both market- and peer-beating returns
since their respective launch dates in 2008. The Coronation Global Emerging Markets Fund has generated an annualised alpha
of 7.0% (gross of fees) since July 2008, while the Coronation Africa Frontiers portfolio has outperformed its benchmark
by 12.9% p.a. (gross of fees) since October 2008.
Retail
The retail business continued to attract a disproportionate level of industry flows, with total net inflows amounting to
R32 billion across our domestic retail product range. We do not expect flows at these levels to persist in the years ahead.
Coronation is now the largest manager of long-term retail assets in the local collective investment schemes industry, with a
market share of 15.1% (September 2013: 13.6%). For the second consecutive year, Coronation was named Raging Bull South African
Management Company of the Year, and for the fourth consecutive year, Morningstar Best Large Fund House.
As at 30 September 2014, all domestic and international flagship funds ranked in the 1st quartile of their respective Morningstar
categories since launch, the highlights of which include:
– Coronation Top 20 has outperformed its benchmark by 5.6% 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 2.7% p.a. (after fees) over the same period.
– Coronation Balanced Defensive, the no. 1 multi-asset low equity fund in South Africa since launch in February 2007, has
outperformed inflation by 4.8% p.a. (after fees) over the same period.
– Coronation Strategic Income, the no. 1 multi-asset income fund since inception in July 2001, has outperformed cash on average
by 2.9% p.a. (after fees) over the same period.
– Coronation Global Opportunities Equity [ZAR] Feeder, the no. 1 global equity general fund in South Africa since inception in
August 1997, has outperformed the global equity market by 1.5% p.a. (after fees in rands) over the same period.
– 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 composite benchmark by 1.6% p.a. (after fees in rands) over the same period.
TRANSFORMATION
Coronation is a Level III contributor as measured by the Department of Trade and Industry’s Broad-Based Black Economic Empowerment
Codes of Good Practice (issued by Empowerdex).
BOARD APPOINTMENT
On 7 October 2014, Lulama Boyce was appointed independent non-executive director. Ms Boyce, a qualified chartered accountant, is
also an independent non-executive director of Coronation Management Company (RF) Proprietary Limited and Coronation Life Assurance
Company Limited.
FINAL 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 final gross dividend of 296 cents per share has been declared for the year ended
30 September 2014, resulting in a final net dividend of 251.6 cents per share for shareholders subject to Dividends Tax (DT).
Together with the interim gross dividend of 275 cents per share, this amounts to a total gross dividend of 571 cents per share
for the year. No STC credits are available.
In compliance with the Listings Requirements of the JSE Limited, the following dates are applicable:
Last day to trade Friday, 28 November 2014
Shares trade ex dividend Monday, 1 December 2014
Record date Friday, 5 December 2014
Payment date Monday, 8 December 2014
Share certificates may not be dematerialised or rematerialised between Monday, 1 December 2014 and Friday, 5 December 2014, both
dates inclusive.
Dividends declared after 31 March 2012 are subject to DT, where applicable. In terms of 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.
PROSPECTS
We have been cautioning investors for some time to expect lower returns from markets. The declines in both the local and global
equity markets in September and October of this year have reminded investors that markets do not always follow an upward trajectory.
Coronation is a cyclical business that has benefited from strong markets and excellent performance across our fund range. Earnings
are highly geared to market returns and shareholders should not expect earnings to grow every year off the current high base.
Volatility typically presents an opportunity to long-term investors. We therefore welcome recent market movements as an opportunity
to add value in our client portfolios. We will diligently adhere to our single-minded pursuit of identifying long-term value.
EXTERNAL AUDIT REVIEW
These preliminary condensed consolidated financial statements for the year ended 30 September 2014 have been reviewed by
Ernst & Young Inc., who expressed an unmodified review conclusion. The review has been conducted in accordance with the International
Standard on Review Engagements 2410. A copy of the auditor’s review report is available for inspection at the company’s registered
office together with the financial statements identified in the auditor’s report.
Shams Pather Anton Pillay John Snalam
Chairman Chief Executive Officer Chief Financial Officer
Cape Town
11 November 2014
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
30 Sept 30 Sept
2014 % 2013
R million Change R million
Fund management activities
Revenue 4 774 31% 3 635
Other income 14 3
Operating expenses (2 171) 28% (1 695)
Share-based payment expense (1) (6)
Other expenses (2 170) (1 689)
Results from operating activities 2 617 35% 1 943
Finance and dividend income 42 27
Finance expense (4) (0)
Share of profit of equity accounted investee 7 5
Profit from fund management 2 662 35% 1 975
Income attributable to policyholder linked assets and
investment partnerships 41 (53%) 88
Net fair value gains on policyholder and investment
partnership financial instruments 59 133
Administration expenses borne by policyholders and
investors in investment partnerships (18) (45)
Profit before income tax 2 703 2 063
Income tax expense (699) (606)
Taxation on shareholder profits (658) (518)
Taxation on policyholder investment contracts (41) (88)
Profit for the year 2 004 38% 1 457
Other comprehensive income (to be reclassified to
profit or loss in future periods) 31 24
Foreign currency translation differences for foreign operations 22 21
Net change in fair value of available-for-sale financial assets 9 4
Net change in fair value of available-for-sale financial assets
reclassified to profit or loss - (1)
Total comprehensive income for the year 2 035 37% 1 481
Profit attributable to:
- equity holders of the company 2 001 38% 1 455
- non-controlling interest 3 2
Profit for the year 2 004 1 457
Total comprehensive income attributable to
- equity holders of the company 2 032 37% 1 479
- non-controlling interest 3 2
Total comprehensive income for the year 2 035 1 481
Earnings per share (cents)
- basic 572.1 32% 434.0
- diluted 572.1 37% 416.1
Note to the statement of comprehensive income
Headline earnings per share (cents)
- basic 571.6 32% 433.9
- diluted 571.6 37% 416.0
Dividend per share (cents)
- interim 275.0 69% 163.0
- final 296.0 17% 253.0
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
30 Sept 30 Sept
2014 2013
R million R million
Assets
Intangible assets 1 088 1 088
Equipment 22 16
Investment in equity-accounted investees 38 34
Deferred tax asset 166 111
Investments backing policyholder funds and investments
held through investment partnerships 73 721 70 269
Investment securities 234 175
Trade and other receivables 760 946
Cash and cash equivalents 832 294
Total assets 76 861 72 933
Liabilities
Long-term borrowings (note 3) 152 -
Deferred tax liabilities 76 78
Policyholder investment contract liabilities and liabilities
to holders of interests in investment partnerships 73 647 70 191
Taxation payable 59 11
Trade and other payables 731 646
Total liabilities 74 665 70 926
Net assets 2 196 2 007
Equity
Share capital and premium 256 256
Retained earnings 1 841 1 570
Reserves 92 177
Total equity attributable to equity holders of the company 2 189 2 003
Non-controlling interest 7 4
Total equity 2 196 2 007
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS*
Reviewed Audited
30 Sept 30 Sept
2014 2013
R million R million
Cash flows from operating activities
Profit from fund management 2 662 1 975
Non-cash and other adjustments (38) (17)
Operating profit before changes in working capital 2 624 1 958
Working capital changes 271 (489)
Cash flows from policyholder and investment partnership activities (772) 5 399
Cash generated from operations 2 123 6 868
Interest paid (2) -
Income taxes paid (664) (626)
Net cash from operating activities 1 457 6 242
Cash flows from investing activities
Finance and dividend income 42 27
Acquisition of equipment (18) (12)
Acquisition of investment securities (40) (56)
Net cash from investing activities (16) (41)
Cash flows from financing activities
Issue of preference shares 150 -
Dividends paid (1 847) (955)
Net cash from financing activities (1 697) (955)
(Decrease)/increase in cash and cash equivalents (256) 5 246
Net increase/(decrease) in cash and cash equivalents - shareholders 516 (153)
Net (decrease)/increase in cash and cash equivalents
- policyholders and investment partnerships (772) 5 399
Cash and cash equivalents at beginning of year 15 076 9 809
Cash and cash equivalents at beginning of year - shareholders 294 426
Cash and cash equivalents at beginning of year
- policyholders and investment partnerships 14 782 9 383
Effect of exchange rate fluctuations on cash held 22 21
Cash and cash equivalents at end of year 14 842 15 076
Cash and cash equivalents at end of year - shareholders 832 294
Cash and cash equivalents at end of year - policyholders and investment partnerships 14 010 14 782
*Cash and cash equivalents of policyholders and investment partnerships are not available for use by the group. These amounts
represent the net cash flows from contributions and withdrawals and related investing activities.
PRELIMINARY CONDENSED 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 year
Profit for the year 1 455 1 455 2 1 457
Other comprehensive income
(available to be recycled to
profit and loss in future
periods)
Currency translation differences 21 21 21
Revaluation of available-
for-sale financial assets 3 3 3
Total other comprehensive
income - 21 - - 3 24 - 24
Total comprehensive income
for the year - 21 1 455 - 3 1 479 2 1 481
Transactions with owners
recorded directly to equity
Share-based payments 6 6 6
Dividends paid (920) (920) (920)
Distributions to Imvula Trust
beneficiaries (35) (35) (35)
Total transactions with owners - - (955) 6 - (949) - (949)
Balance at 30 September 2013
(audited) 256 42 1 570 127 8 2 003 4 2 007
Total comprehensive income
for the year
Profit for the year 2 001 2 001 3 2 004
Other comprehensive income
(available to be recycled to
profit and loss in future
periods)
Currency translation differences 22 22 22
Revaluation of available-
for-sale financial assets 9 9 9
Total other comprehensive income - 22 - - 9 31 - 31
Total comprehensive income
for the year - 22 2 001 - 9 2 032 3 2 035
Transactions with owners recorded
directly in equity
Share-based payments 1 1 1
Transfer to retained earnings 117 (117)
Dividends paid (1 847) (1 847) (1 847)
Total transactions with owners - - (1 730) (116) - (1 846) - (1 846)
Balance at 30 September 2014
(reviewed) 256 64 1 841 11 17 2 189 7 2 196
Diluted number of shares
Reviewed Audited
30 Sept 30 Sept
2014 2013
'000 '000
Weighted average number of shares in issue during the year 349 799 335 328
Shares to be issued
- BEE transaction - 14 434
Diluted weighted average number of shares in issue 349 799 349 762
PRELIMINARY CONDENSED CONSOLIDATED SEGMENT REPORT
Africa International Group
Reviewed Audited Reviewed Audited Reviewed Audited
30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept
R million 2014 2013 2014 2013 2014 2013
Segment external revenue 3 260 2 871 1 514 764 4 774 3 635
Segment operating expenses (1 427) (1 310) (744) (385) (2 171) (1 695)
Segment profit 1 833 1 561 770 379 2 603 1 940
Share of income of equity
accounted investee 7 5 - - 7 5
Net finance and other income/(expense) 56 30 (4) - 52 30
Profit from fund management 1 896 1 596 766 379 2 662 1 975
Income attributable to policyholder
linked assets and investment
partnerships 41 88
Profit before income tax 2 703 2 063
Segment assets 1 329 1 172 519 259 1 848 1 431
Investments backing policyholder
funds and investments held
through investment partnerships
and other assets 75 013 71 502
Total assets 76 861 72 933
RECONCILIATION OF HEADLINE EARNINGS
Reviewed Audited
30 Sept 30 Sept
2014 2013
R million R million
Earnings attributable to ordinary shareholders 2 001 1 455
Effect of adjustments (2) -
Profit on disposal of available-for-sale financial assets - (1)
(Gain)/loss on disposal of group operations (2) 1
Headline earnings attributable to ordinary shareholders 1 999 1 455
Notes to the condensed consolidated financial statements
1. The financial information has been prepared in accordance with the framework concepts and the measurement 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 financial statements, that was the basis
for the consolidated condensed financial statements, have taken into account the requirements of IFRS 13 Fair Value
Measurement, IFRS 12 Disclosure of Interests in Other Entities and the amended IAS 34 Interim Financial Reporting, which
became effective during the current period. The impact of these requirements resulted in additional disclosures relating to
fair value measures and interest in other entities being included in the annual financial statements. Other standards which
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, A Rhoda 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. 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.
4. 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 policyholder
and investment partnership liabilities that are included in Level 1 of the hierarchy, are measured with reference to the
quoted prices in an active market 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. The fair values of these deposits are determined using a discounted cash flow valuation
methodology based on market rates, reflecting the time value of money and counter party credit risk. The fair values of
the policyholder and investment partnership liabilities included in Level 2, are measured with reference to the fair
values of the mentioned assets underlying these liabilities.
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
Sept 2014
Investments backing policyholder funds and investments
held through investment partnerships 59 482 8 563 - 68 045
Investment securities 206 - 28 234
59 688 8 563 28 68 279
Policyholder and investment partnership liabilities 57 171 8 449 - 65 620
Sept 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 30 September 2014, there were no transfers of financial assets between the levels. Cash
balances of R5 325 million (March 2013: R5 084 million) have been excluded in the current and prior years respectively.
DIRECTORS
S Pather (Chairman)*, A C Pillay (CEO), J A Snalam (CFO), L Boyce*, J G February*, J D McKenzie*, 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
Any forward-looking information contained in this announcement has not been reviewed or reported on by the company’s external
auditors.
Date: 11/11/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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