Wrap Text
Reviewed preliminary condensed consolidated financial results for the year ended 30 September 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 PRELIMINARY CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2015
- Assets under management of R610 billion, up 3.7%
- Diluted headline earnings per share of 516.0 cents, down 9.7%
- Total dividend per share of 516.0 cents
Despite a challenging market environment, Coronation Fund Managers Limited (Coronation) delivered a credible set of results in line
with management expectations for the 12 months to 30 September 2015. Market volatility intensified throughout the year, reflecting
the deterioration in the outlook for global growth and the withdrawal of funds from emerging market equities and currencies. The
MSCI All Country World Index returned -6.2%, while the MSCI Emerging Markets Index declined by 19.0% (in US dollar terms) for the
year. The FTSE/JSE All Share delivered a US dollar return of -14.5%, which translated into a positive return of 4.8% in rand
terms for the year. Albeit not the worst among the emerging market currency grouping, the rand fell 18.4% against the US dollar
(to close at R13.82) and 7.9% against the euro (to close at R15.46) over the period.
Results
Coronation is a cyclical business and hence its annual revenue stream is highly geared to both the returns of the market and
the level of outperformance it generates on behalf of clients across its fund range.
Due to a decline in both market returns and the abnormally high level of performance fees generated in the prior financial year,
revenue for the current period declined by 7.0% to R4.4 billion. This, in turn, led to a 9.7% decline in diluted headline earnings
per share to 516.0 cents compared with the record high earnings base achieved in the prior financial year (2014: 571.6 cents).
Business update
Coronation has a proven philosophy of long-term investing, which has added significant value to investors over our 22-year history.
The long-term success of our investment approach is best illustrated by the annualised alpha of 2.9% delivered by our flagship
domestic equity fund, Houseview Equity, since inception in 1993.
Assets under management increased by 3.7% to R610 billion for the 12 months to end September (2014: R588 billion) against a backdrop
of meaningful declines in global markets and total net outflows of R15.3 billion. We attracted strong inflows to our international
products and retail business, and in line with management expectations, recorded net outflows in our established South African
institutional business. These outflows are a result of our decision to close to new institutional investors in our SA Equity and
Multi-Asset portfolios three years ago. This active decision in a shrinking formal occupational retirement fund market means that
stakeholders should expect continued institutional outflows in the years ahead. Coronation has a sizeable share of the South African
institutional savings market, and given the above, overall market share will decline to a normal level in coming years.
Institutional business
We remain one of the leading managers of institutional assets in the South African savings market. Following many years of significant
market share gains, the recorded net outflows in our South African institutional business of R34.2 billion were in line with our
expectations. These outflows, however, continue to be offset by strong flows into our niche global product offering. For the year,
our global products attracted net inflows of R12.4 billion, bringing total net outflows for the institutional business to R21.8 billion.
We continue to identify product opportunities suited to our long-term investment approach. In this regard, we seeded two new
international products early in the year: Coronation Active Global Equity and Coronation Global Frontiers.
Key highlights from our institutional fund range include:
- Our global balanced portfolios ranked in the 1st quartile over 5 and 10 years in the Alexander Forbes Global Large Manager
Watch (TM) survey to end September 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 (TM) survey.
- Global Absolute, our first-to-market absolute portfolio, has produced alpha of 4.6% p.a. (gross of fees) since inception in
August 1999.
- Our specialist bond portfolio, Strategic Bond, has outperformed the local bond market by 1.6% p.a. (gross of fees) since
inception in January 2008.
- The Coronation Global Emerging Markets Strategy has generated an annualised alpha of 4.1% (gross of fees) since inception in
July 2008.
- Our specialist African equity portfolio, Africa Frontiers, has outperformed its benchmark by 6.0% p.a. (gross of fees) since
inception in October 2008.
Retail business
Our retail business maintained its position as one of the country's foremost managers of long-term assets within the collective
investment schemes industry, with a market share of 14.6% (2014: 15.1%). Net inflows for the year were R6.5 billion. This
normalisation of flows follows a number of exceptional years in which Coronation attracted disproportionately high levels of
industry assets.
Coronation was named Raging Bull South African Management Company of the Year for the third consecutive year, and Morningstar Best
Large Fund House for the fifth consecutive year. As at 30 September 2015, the majority of our domestic and international flagship
funds ranked in the 1st quartile of their respective Morningstar categories since their respective launch dates and after the
deduction of all fees. Highlights include:
- Coronation Top 20, a top-performing general equity fund since launch in October 2000, has outperformed its benchmark by 4.5%
p.a. (net of fees) over the same period.
- Coronation Balanced Plus, the no. 1 balanced fund in South Africa since launch in April 1996, has outperformed its average
competitor by 1.9% p.a. (net of fees), over the same period.
- Coronation Capital Plus, the no. 1 multi-asset medium equity fund since launch in July 2001, has outperformed inflation by
7.6% p.a. (net of fees) over the same period.
- Coronation Balanced Defensive, a top-performing conservative fund since launch in February 2007, has outperformed inflation
by 4.4% p.a. (net of fees) over the same period.
- Coronation Strategic Income, the no. 1 multi-asset income fund since launch in July 2001, has outperformed cash by, on
average, 2.8% p.a. (net of fees) over the same period.
- Coronation Global Opportunities Equity [ZAR] Feeder, the no. 1 global equity general fund since launch in August 1997, has
outperformed the global equity market by 1.4% p.a. (net of fees) over the 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 average competitor by 1.6% p.a. (net of fees) over the same period.
During the period, three new retail products were added to the range: Coronation Global Equity Select [USD], Coronation Global
Equity Select [ZAR] Feeder, and the Coronation Tax-Free Investment offering. In addition, in July 2015 we announced a comprehensive
fee and benchmark adjustment across a large number of funds, with an implementation date of 1 October 2015.
Transformation
Coronation remains committed to achieving meaningful, sustainable and substantive transformation within the financial services
industry in South Africa. As at 30 September 2015, Coronation is measured as a Level 3 contributor in terms of the Financial Sector
Code. Key highlights include:
- More than half of our staff composition in South Africa are black. At executive committee level black representation is 75%, while
at board level this figure is 57%.
- Coronation is 21.5% black owned as measured by the Financial Sector Charter, which includes our staff-owned empowerment vehicle, the
Imvula Trust.
- The Coronation Business Support Programme, now in its tenth year, continues to play a meaningful role in advancing the black
stockbroking community. To date, a total of 9 South African stockbroking companies have directly benefited from this initiative.
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. After assessing any projected future cash requirements, a final gross dividend of 270.0 cents
per share has been declared for the year ended 30 September 2015, resulting in a final net dividend of 229.5 cents per share for
shareholders subject to Dividends Tax (DT). Together with the interim gross dividend of 246.0 cents per share, this amounts to a
total gross dividend of 516.0 cents per share for the year.
Last day to trade Friday, 27 November 2015
Shares trade ex dividend Monday, 30 November 2015
Record date Friday, 4 December 2015
Payment date Monday, 7 December 2015
Share certificates may not be dematerialised or rematerialised between Monday, 30 November 2015 and Friday, 4 December 2015, both
dates inclusive. 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 9 675 107 719.
Prospects
Coronation is an active manager solely focused on delivering strong market outperformance over the long term. We have a proven long-term
investment track record of alpha generation that has endured many periods of short-term underperformance over the past 22 years.
Despite recent levels of extreme market volatility, the long-term investment track records of all key funds remain highly compelling.
While the likelihood of continued near-term volatility persists, as disciplined and rational allocators of capital, we are committed to
identifying those opportunities that will generate long-term performance across all our client portfolios. Our success in achieving this
objective will generate long-term value for all stakeholders.
External audit review
The external auditors, EY, reviewed the preliminary condensed consolidated statements of financial position of Coronation as at
30 September 2015 and the related condensed consolidated statement of comprehensive income, changes in equity and cash flows for the year
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.
The auditor's report does not necessarily report on all of the information contained in this announcement. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's
report together with the accompanying financial information from the issuer's registered office.
Shams Pather Anton Pillay John Snalam
Chairman Chief Executive Officer Chief Financial Officer
Cape Town
10 November 2015
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
30 Sept Change 30 Sept
2015 % 2014
R million R million
Fund management activities
Revenue 4 442 (7) 4 774
Other income 28 14
Operating expenses (2 090) (4) (2 171)
Share-based payment expense (11) (1)
Other expenses (2 079) (2 170)
Results from operating activities 2 380 (9) 2 617
Finance and dividend income 32 42
Finance expense (15) (4)
Share of profit of equity-accounted investee 8 7
Profit from fund management 2 405 (10) 2 662
Income attributable to policyholder linked assets and investment partnerships 25 41
Net fair value gains on policyholder and investment partnership financial instruments 54 59
Administration expenses borne by policyholders and investors in investment partnerships (29) (18)
Profit before income tax 2 430 (10) 2 703
Income tax expense (620) (699)
Taxation on shareholder profits (595) (658)
Taxation on policyholder investment contracts (25) (41)
Profit for the year 1 810 (10) 2 004
Other comprehensive income (to be reclassified to profit or loss in future periods) 53 31
Foreign currency translation differences for foreign operations 99 22
Net change in fair value of available-for-sale financial assets (46) 9
Total comprehensive income for the year 1 863 2 035
Profit attributable to:
- equity holders of the company 1 812 (9) 2 001
- non-controlling interest (2) 3
Profit for the year 1 810 2 004
Total comprehensive income attributable to:
- equity holders of the company 1 865 (8) 2 032
- non-controlling interest (2) 3
Total comprehensive income for the year 1 863 2 035
Earnings per share (cents)
- basic 517.9 (9) 572.1
- diluted 517.9 (9) 572.1
Note to the statement of comprehensive income
Headline earnings per share (cents)
- basic 516.0 (10) 571.6
- diluted 516.0 (10) 571.6
Dividend per share (cents)
- interim 246.0 (11) 275.0
- final 270.0 (9) 296.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
30 Sept 30 Sept
2015 2014
R million R million
Assets
Intangible assets 1 088 1 088
Equipment 37 22
Investment in equity-accounted investees 41 38
Deferred tax asset 145 166
Investments backing policyholder funds and investments held through investment partnerships 66 256 73 721
Investment securities 751 234
Taxation receivable 2 -
Trade and other receivables 509 760
Cash and cash equivalents 728 832
Total assets 69 557 76 861
Liabilities
Long-term borrowings (note 3) 300 152
Deferred tax liabilities 78 76
Policyholder investment contract liabilities and liabilities to holders of interests
in investment partnerships 66 181 73 647
External investors in consolidated funds 124 -
Taxation payable - 59
Trade and other payables 705 731
Total liabilities 67 388 74 665
Net assets 2 169 2 196
Equity
Share capital and premium 256 256
Retained earnings 1 757 1 841
Reserves 156 92
Total equity attributable to equity holders of the company 2 169 2 189
Non-controlling interest - 7
Total equity 2 169 2 196
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
30 Sept 30 Sept
2015 2014
R million R million
Cash flows from operating activities
Profit from fund management 2 405 2 662
Non-cash and other adjustments (21) (38)
Operating profit before changes in working capital 2 384 2 624
Working capital changes 238 271
Cash flows from policyholder and investment partnership activities (6 171) (772)
Cash (utilised)/generated from operations (3 549) 2 123
Interest paid (15) (2)
Income taxes paid (634) (664)
Net cash from operating activities (4 198) 1 457
Cash flows from investing activities
Finance and dividend income 32 42
Acquisition of equipment (27) (18)
Net acquisition of investment securities (435) (40)
Net cash from investing activities (430) (16)
Cash flows from financing activities
Issue of preference shares 150 150
Dividends paid (1 896) (1 847)
Net cash from financing activities (1 746) (1 697)
Decrease in cash and cash equivalents (6 374) (256)
Net (decrease)/increase in cash and cash equivalents - shareholders (203) 516
Net decrease in cash and cash equivalents - policyholders and investment partnerships (6 171) (772)
Cash and cash equivalents at beginning of year 14 842 15 076
Cash and cash equivalents at beginning of year - shareholders 832 294
Cash and cash equivalents at beginning of year - policyholders and investment partnerships 14 010 14 782
Effect of exchange rate fluctuations on cash held 99 22
Cash and cash equivalents at end of year 8 567 14 842
Cash and cash equivalents at end of year - shareholders 728 832
Cash and cash equivalents at end of year - policyholders and investment partnerships 7 839 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.
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 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 (audited) 256 64 1 841 11 17 2 189 7 2 196
Total comprehensive income for the year
Profit for the year 1 812 1 812 (2) 1 810
Other comprehensive income (available to be recycled to profit and loss in future periods)
Currency translation differences 99 99 99
Revaluation of available-for-sale financial assets (46) (46) (46)
- net change in fair value (40) (40) (40)
- reclassified to profit or loss on disposal (6) (6) (6)
Total other comprehensive income - 99 - - (46) 53 - 53
Total comprehensive income for the year - 99 1 812 - (46) 1 865 (2) 1 863
Transactions with owners recorded directly in equity
Share-based payments 11 11 11
Dividends paid (1 896) (1 896) (1 896)
Closure of subsidiary (5) (5)
Total transactions with owners - - (1 896) 11 - (1 885) (5) (1 890)
Balance at 30 September 2015 (reviewed) 256 163 1 757 22 (29) 2 169 - 2 169
DILUTED NUMBER OF SHARES
Reviewed Audited
30 Sept 30 Sept
2015 2014
'000 '000
Weighted average number of shares in issue during the year 349 799 349 799
Weighted average number of shares potentially in issue 349 799 349 799
Actual number of shares in issue at the end of the year 349 799 349 799
CONDENSED CONSOLIDATED SEGMENT REPORT
Africa International Group
R million Reviewed Audited Reviewed Audited Reviewed Audited
30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept
2015 2014 2015 2014 2015 2014
Segment external revenue 3 008 3 260 1 434 1 514 4 442 4 774
Segment operating expenses (1 356) (1 427) (734) (744) (2 090) (2 171)
Segment profit 1 652 1 833 700 770 2 352 2 603
Share of income of equity- accounted investee 8 7 - - 8 7
Net finance and other income/(expense) 27 56 18 (4) 45 52
Profit from fund management 1 687 1 896 718 766 2 405 2 662
Income* 25 41
Profit before income tax 2 430 2 703
Segment assets 1 373 1 329 652 519 2 025 1 848
Investments* 67 532 75 013
Total assets 69 557 76 861
* Income and investments are attributable to and backing policyholder funds and investments held through investment partnerships and other assets.
RECONCILIATION OF HEADLINE EARNINGS
Reviewed Audited
30 Sept 30 Sept
2015 2014
R million R million
Earnings attributable to shareholders 1 810 2 004
Non-controlling interest 2 (3)
Earnings attributable to ordinary shareholders 1 812 2 001
Profit on disposal of available-for-sale financial assets (6) -
Gain on disposal of group operations (1) (2)
Headline earnings attributable to ordinary shareholders 1 805 1 999
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 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 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
rand, 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 H Rawoot CA(SA).
2. Related party transactions
Related party transactions for the current year are similar to those disclosed in the group's annual financial statements for the
year ended 30 September 2014. No new significant related party transactions arose during the current year.
3. 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.
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 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 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
30 Sept 2015
Investments backing policyholder funds and investments held through investment partnerships 56 909 6 075 - 62 984
Investment securities 717 - 34 751
57 626 6 075 34 63 735
Policyholder and investment partnership liabilities 56 909 6 003 - 62 912
30 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
During the current reporting period, it was determined that transfers between levels of the assets and liabilities held at fair
value occurred. R810 million in debentures were transferred from Level 1 to Level 2 as these are now considered to be held in an
inactive market.
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 Registration number: 1973/009318/06
Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001
Sponsor:
Deutsche Securities (SA) Proprietary Limited
JSE share code: CML
ISIN: ZAE000047353
http://www.coronation.com
Any forward-looking information contained in this announcement has not been reviewed or reported on by the company's external auditors.
Date: 10/11/2015 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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