Wrap Text
Reviewed interim results for the six months ended 31 March 2015
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 2015
ASSETS UNDER MANAGEMENT OF R636 BILLION
DILUTED HEADLINE EARNINGS PER SHARE OF 246.7 CENTS
INTERIM DIVIDEND PER SHARE OF 246 CENTS
RESULTS
For the six months to 31 March 2015, Coronation Fund Managers delivered a good set of results that are in line with management expectations.
Following an extended period of extraordinary growth, funds under management continued to increase, recording an 8% rise to R636 billion.
This was supported by international and retail flows and a strong, albeit volatile, market environment. Over the period, developed markets
once again outperformed emerging markets (3.6% for the MSCI World Index versus -2.3% for the MSCI Emerging Markets Index, both in US dollar
terms), while the FTSE/JSE All Share Index returned 7.3% (down 0.3% in US dollar terms). The rand continued its decline against the US dollar
to close the period 7.1% lower at R12.13, but appreciated by 8.4% against the euro to close at R13.14.
Reduced levels of performance fees generated during the six-month period, when compared to the high quantum in the previous comparable
period, resulted in revenue declining by 6% to R2 167 million for the half year. Diluted headline earnings per share declined by 10% to
246.7 cents (March 2014: 275.4 cents).
BUSINESS UPDATE
As a long-term manager, the success of our philosophy and process is best illustrated by the track record of our
longest-running domestic equity fund, Houseview Equity, which has outperformed the market by 3% p.a. since inception in 1993. Key highlights
from our primary client market segments, institutional and retail, are included below.
Institutional: Over the period net outflows of R0.56 billion were recorded. Our international offering attracted net inflows of R10.28
billion, largely into the emerging market product. Net outflows in the South African segment of our institutional business are attributable
to the relative maturity of the domestic retirement fund industry and the closure of our SA Equity and Multi-Asset funds to new institutional
clients. In November 2014, the Coronation Active Global Equity and Global Frontiers funds were added to our international fund range.
Long-term outperformance across our funds remains compelling, examples of which include:
Our longest-running domestic equity fund, Houseview Equity, has delivered annualised alpha of 3% (gross of fees) since inception in
October 1993.
Global Absolute, our first-to-market absolute portfolio, has produced alpha of 5.2% p.a. (gross of fees) since inception in August 1999.
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.
Our global balanced portfolios ranked in the 1st quartile over 5 and 10 years in the Alexander Forbes Global Large Manager Watch survey to
end March 2015, and our domestic balanced portfolios were in the 1st quartile over 5 years and 2nd quartile over 10 years in the SA Large
Manager Watch survey.
The Coronation Global Emerging Markets Fund has generated an annualised alpha of 5.5% (gross of fees) since inception in July 2008.
Our specialist African equity portfolio, Africa Frontiers, has outperformed its benchmark by 8.8% p.a. (gross of fees) since inception
in October 2008.
Retail: We remain the largest manager of long-term retail assets in the South African collective investment schemes industry with a
market share of 15.2% (September 2014: 15.1%). Although industry inflows plateaued over the six-month period, we continued to attract
a significant portion of available flows, recording net inflows of R8.01 billion.
For the third consecutive year, Coronation was named Raging Bull South African Management Company of the Year, and for the fifth
consecutive year, Morningstar Best Large Fund House. As at 31 March 2015, all domestic and international flagship funds ranked in the
1st quartile of their respective Morningstar categories since launch (after the deduction of all fees). Highlights include:
Coronation Top 20, the no.1 general equity fund since launch in October 2000, has outperformed its benchmark by 5.4% p.a. (net of fees)
over the same period.
Coronation Balanced Plus, the no.1 balanced fund since launch in April 1996, has outperformed its average competitor by 2.7% p.a.
(net of fees) over the same period.
Coronation Capital Plus, the no.1 multi-asset medium equity fund since inception in July 2001, has outperformed inflation by 8.2% p.a.
(net of fees) over the same period.
Coronation Balanced Defensive, a top performing conservative fund, has outperformed inflation by 4.9% p.a. (net of fees) since
inception in March 2007.
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. (net of fees) overthe same period.
Coronation Global Managed [ZAR] Feeder, the no.1 global multi-asset high equity fund in South Africa since launch in October 2009,
has outperformed its composite benchmark by 1.6% p.a. (net of fees) over the same period.
Over the six-month period we added to our international offering with the introduction of the Coronation Global Equity Select [USD]
Fund and Coronation Global Equity Select [ZAR] Feeder Fund. Additionally, we are in the process of reviewing the fee structures and
investment mandates across our retail fund range, which will result in a simplification and/or reduction in fees for certain funds.
We expect to communicate the changes to our retail clients in the coming months.
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 2015 of 246.0 cents per share has been declared, resulting in a net dividend of 209.1 cents per share for shareholders
subject to Dividends Tax (DT). In compliance with the Listings Requirements of the JSE Limited, the following dates are applicable:
Last day to trade Friday, 5 June 2015
Shares trade ex dividend Monday, 8 June 2015
Record date Friday, 12 June 2015
Payment date Monday, 15 June 2015
Share certificates may not be dematerialised or rematerialised between Monday, 8 June 2015 and Friday, 12 June 2015, both dates inclusive.
Dividends declared after 31 March 2012 are subject to 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
PROSPECTS
Our financial results for the period serve as a reminder that the earnings stream of a fund manager is cyclical and volatile.
Notwithstanding the fact that the long-term investment performance across our fund range remains excellent, we have cautioned shareholders
for some time that the elevated levels of markets as well as volatility in short-term alpha can have a significant impact on the earnings
of our company.
As long-term investors, our primary focus is on creating long-term value for our clients. If we are successful in doing this, then all
stakeholders in ourbusiness will share in that success.
EXTERNAL AUDIT REVIEW
The external auditors, EY, reviewed the condensed consolidated statement of financial position of Coronation Fund Managers Limited
Group as at 31 March 2015 and the related condensed consolidated 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 EY are available for inspection at the registered office of the company.
Any forward-looking information contained in this announcement has not been reviewed or reported on by the company's external auditors.
Shams Pather Anton Pillay John Snalam
Chairman Chief Executive Officer Chief Financial Officer
Cape Town
19 May 2015
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2015 2014 2014
R million R million % Change R million
Fund management activities
Revenue 2 167 2 308 (6) 4 774
Other income 9 7 14
Operating expenses (1 035) (1 042) (1) (2 171)
Share-based payment expense (3) (2) (1)
Other expenses (1 032) (1 040) (2 170)
Results from operating activities 1 141 1 273 (10) 2 617
Finance and dividend income 13 15 42
Finance expense (6) (1) (4)
Share of profit of equity-accounted investee 4 4 7
Profit from fund management 1 152 1 291 (11) 2 662
Income attributable to policyholder linked assets and
investment partnerships 15 33 41
Net fair value gains on policyholder and investment
partnership financial instruments 30 41 59
Administration expenses borne by policyholders and
investors in investment partnerships (15) (8) (18)
Profit before income tax 1 167 1 324 (12) 2 703
Income tax expense (306) (358) (699)
Taxation on shareholder profits (291) (325) (658)
Taxation on policyholder investment contracts (15) (33) (41)
Profit for the period 861 966 (11) 2 004
Other comprehensive income (note 3)
Foreign currency translation differences for foreign operations 26 3 22
Net change in fair value of available-for-sale financial assets 10 6 9
Other comprehensive income for the period 36 9 31
Total comprehensive income for the period 897 975 2 035
Profit attributable to:
- equity holders of the company 863 965 (11) 2 001
- non-controlling interest (2) 1 3
Profit for the period 861 966 2 004
Total comprehensive income attributable to:
- equity holders of the company 899 974 (8) 2 032
- non-controlling interest (2) 1 3
Total comprehensive income for the period 897 975 2 035
Earnings per share (cents)
- basic 246.8 276.0 (11) 572.1
- diluted 246.8 276.0 (11) 572.1
Note to the statement of comprehensive income
Headline earnings per share (cents)
- basic 246.7 275.4 (10) 571.6
- diluted 246.7 275.4 (10) 571.6
Dividend per share (cents)
- interim 246.0 275.0 (11) 275.0
- final 296.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
31 March 31 March 30 Sept
R million 2015 2014 2014
Assets
Intangible assets 1 088 1 088 1 088
Equipment 37 24 22
Investment in equity-accounted investees 37 34 38
Deferred tax asset 129 177 166
Investments backing policyholder funds and investments
held through investment partnerships 74 698 70 318 73 721
Investment securities 619 223 234
Trade and other receivables 525 733 760
Cash and cash equivalents 581 838 832
Total assets 77 714 73 435 76 861
Liabilities
Long-term borrowings (note 4) 303 150 152
Deferred tax liabilities 80 100 76
Policyholder investment contract liabilities and liabilities
to holders of interests in investment partnerships 74 621 70 222 73 647
Taxation payable 77 88 59
Trade and other payables 572 776 731
Total liabilities 75 653 71 336 74 665
Net assets 2 061 2 099 2 196
Equity
Share capital and premium 256 256 256
Retained earnings 1 669 1 650 1 841
Reserves 131 188 92
Total equity attributable to equity holders of the company 2 056 2 094 2 189
Non-controlling interest 5 5 7
Total equity 2 061 2 099 2 196
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
R million 2015 2014 2014
Cash flows from operating activities
Profit from fund management 1 152 1 291 2 662
Non-cash and other adjustments (3) (7) (38)
Operating profit before changes in working capital 1 149 1 284 2 624
Working capital changes 77 343 271
Cash flows from policyholders and investment partnership activities (5 287) (3 175) (772)
Cash (utilised)/generated from operations (4 061) (1 548) 2 123
Interest paid (6) (1) (2)
Income taxes paid (234) (310) (664)
Net cash from operating activities (4 301) (1 859) 1 457
Cash flows from investing activities
Finance and dividend income 13 15 42
Acquisition of equipment (21) (13) (18)
Acquisition of investment securities (370) (42) (40)
Net cash from investing activities (378) (40) (16)
Cash flows from financing activities
Dividends paid (1 035) (885) (1 847)
Issue of preference shares 150 150 150
Net cash from financing activities (885) (735) (1 697)
Increase in cash and cash equivalents (5 564) (2 634) (256)
Net (decrease)/increase in cash and cash equivalents - shareholders (277) 541 516
Net decrease in cash and cash equivalents - policyholders and
investment partnerships (5 287) (3 175) (772)
Cash and cash equivalents at beginning of period 14 842 15 076 15 076
Cash and cash equivalents at beginning of period - shareholders 832 294 294
Cash and cash equivalents at beginning of period - policyholders and
investment partnerships 14 010 14 782 14 782
Effect of exchange rate fluctuations on cash held 26 3 22
Cash and cash equivalents at end of period 9 304 12 445 14 842
Cash and cash equivalents at end of period - shareholders 581 838 832
Cash and cash equivalents at end of period - policyholders and
investment partnerships 8 723 11 607 14 010
The above cash flows include the policyholder and investment partnership activities. These cash flows represent net contributions and
withdrawals by policyholders and investment partnerships and the related investing activities. Cash and cash equivalents of policyholders
and investment partnerships are not available for use by the shareholders of the group.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued
capital and
reserves
Share Foreign Share- attributable Non-
capital currency based Re- to equity con-
and translation Retained payment valuation holders of trolling Total
R million premium reserve earnings reserve reserve the company interest equity
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 (note 3)
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 (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
Total comprehensive income for the period
Profit for the period 1 036 1 036 2 1 038
Other comprehensive income (note 3)
Currency translation differences 19 19 19
Revaluation of available-for-sale
financial assets 3 3 3
Total other comprehensive income 19 3 22 22
Total comprehensive income for the period 19 1 036 3 1 058 2 1 060
Transactions with owners recorded
directly to equity
Share-based payments (1) (1) (1)
Transfers to retained earnings 117 (117) - -
Dividends paid (962) (962) (962)
Total transactions with owners (845) (118) (963) (963)
Balance at 30 September 2014 (audited) 256 64 1 841 11 17 2 189 7 2 196
Total comprehensive income for the period
Profit for the period 863 863 (2) 861
Other comprehensive income (note 3)
Currency translation differences 26 26 26
Revaluation of available-for-sale
financial assets 10 10 10
- net change in fair value 11 11 11
- reclassified to profit or loss on
disposal (1) (1) (1)
Total other comprehensive income 26 10 36 36
Total comprehensive income for the period 26 863 10 899 (2) 897
Transactions with owners recorded
directly to equity
Share-based payments 3 3 3
Dividends paid (1 035) (1 035) (1 035)
Total transactions with owners (1 035) 3 (1 032) (1 032)
Balance at 31 March 2015 (reviewed) 256 90 1 669 14 27 2 056 5 2 061
EARNINGS PER SHARE
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2015 2014 2014
Weighted average number of ordinary shares in issue during the period 349 799 102 349 799 102 349 799 102
Weighted average number of ordinary shares potentially in issue 349 799 102 349 799 102 349 799 102
R million
Earnings attributable to shareholders 861 966 2 004
Non-controlling interest 2 (1) (3)
Earnings attributable to ordinary shareholders 863 965 2 001
Profit on disposal of financial assets available for sale (1) - -
Gain on disposal of group operations - (2) (2)
Headline earnings attributable to ordinary shareholders 862 963 1 999
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 International Group
Six months Six months Full year Six months Six months Full year Six months Six months Full year
reviewed reviewed audited reviewed reviewed audited reviewed reviewed audited
31 March 31 March 30 Sept 31 March 31 March 30 Sept 31 March 31 March 30 Sept
R million 2015 2014 2014 2015 2014 2014 2015 2014 2014
Segment external revenue 1 403 1 687 3 260 764 621 1 514 2 167 2 308 4 774
Segment operating expenses (637) (739) (1 427) (398) (303) (744) (1 035) (1 042) (2 171)
Segment profit 766 948 1 833 366 318 770 1 132 1 266 2 603
Share of income of equity-
accounted investee 4 4 7 - - - 4 4 7
Net finance and other income/
(expense) 7 21 56 9 - (4) 16 21 52
Profit from fund management 777 973 1 896 375 318 766 1 152 1 291 2 662
Income* 15 33 41
Profit before income tax 1 167 1 324 2 703
Segment assets 1 209 1 394 1 329 553 424 519 1 762 1 818 1 848
Investments* 75 952 71 617 75 013
Total assets 77 714 73 435 76 861
* Income and investments are attributable to and backing policyholder funds and investments held through investment partnerships and other
assets.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation and accounting policies
The financial information has been prepared in accordance with and containing the information required by 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 the information required for a complete set of IFRS 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 rands, rounded
to the nearest million. The accounting policies applied in the presentation of the condensed financial statements are in terms of
IFRS and 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. 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 of R150 million 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. A further R150 million was issued during March 2015 to recapitalise
international subsidiaries that had previously held back profits to seed new investment funds. This amount is due on 31 March 2018 and is
subject to the same terms.
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 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 closing
prices) or indirectly (i.e. derived from closing 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 counterparty 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
March 2015 (Reviewed)
Investments backing policyholder funds and investments
held through investment partnerships 63 737 5 017 - 68 754
Investment securities 591 - 28 619
64 328 5 017 28 69 373
Policyholder and investment partnership liabilities 61 341 4 904 - 66 245
March 2014 (Reviewed)
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
September 2014 (Audited)
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
During the current reporting period, it was determined that transfers between levels of the assets and liabilities held at fair value
occurred. R1 237 million in debentures were transferred from Level 1 to Level 2 as these are now considered to be held in an inactive
market.
Level 3 investments which arose during the current year have not been valued and are carried at cost. No gain or loss has been recognised.
Short positions of R2 432 million (March 2014: R1 906 million; September 2014: R2 350 million) are classified as Level 1 and are measured
with reference to the underlying listed instrument being shorted.
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) (# Appointed 7 October 2014)
Registered office:
7th Floor, MontClare Place, Cnr Campground and Main Roads, Claremont 7708, Cape Town
Postal address:
PO Box 44684, Claremont 7735, Cape Town
Registration number:
1973/009318/06
Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001
JSE share code:
CML
ISIN:
ZAE000047353
Website:
www.coronation.com
Sponsor:
Deutsche Securities (SA) Proprietary Limited
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