Wrap Text
Reviewed interim results for the six months ended 31 March 2016
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 2016
- Assets under management of R606 billion
- Diluted headline earnings per share of 229.7 cents
- Interim dividend per share of 229 cents
REVIEWED INTERIM RESULTS for the six months ended 31 March 2016
Despite another volatile and challenging period, Coronation Fund Managers Limited (Coronation) delivered a credible set of results in line with management
expectations for the six months to 31 March 2016. Following an extended period of volatility in asset prices, client portfolios were well positioned to benefit
from the strong rally in emerging markets, commodities, equities and the property market since the start of the calendar year. For the period under review, the
MSCI Emerging Markets Index delivered 6.5%, while the MSCI All Country World Index returned 5.6% (both in US dollar terms). The FTSE/JSE All Share generated a US
dollar return of -0.4%, which translated into a positive return of 5.6% in rand terms for the six months. The rand continued its decline over the period, losing
5.7% against the US dollar (to close at R14.65) and 7.4% against the euro (to close at R16.70).
As previously noted, Coronation is a cyclical business and hence its 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 the level of performance fees generated compared to the prior
comparable period, revenue for the current period declined by 5.0% to R2.1 billion. This, in turn, led to a 6.9% decline in diluted headline earnings per share
to 229.7 cents (March 2015: 246.7 cents).
BUSINESS UPDATE
The key driver of our success is our ability to create long-term value on behalf of clients in our underlying funds. This we do through an unwavering commitment
to our philosophy of investing for the long term; a philosophy and process that over our 23-year history has returned significant value to investors. Since its
launch in 1993, our flagship domestic equity portfolio, Houseview Equity, has outperformed the market by 2.9% (gross of fees) p.a.
A highly volatile market environment, combined with total net outflows of R48 billion, resulted in a marginal decline in assets under management over the six-
month period to R606 billion (September 2015: R610 billion).
Institutional business
We remain one of the leading managers of institutional assets in the South African savings market, managing client portfolios of R380.4 billion (September 2015:
R387.2 billion). For the period, our established South African institutional business recorded net outflows of R36.5 billion. This was driven largely by
portfolio rebalancing in a shrinking occupational retirement fund market and the fact that we remain closed to new investors in our SA Equity and Multi-Asset
portfolios, a decision implemented almost four years ago. Against this backdrop, stakeholders should expect continued outflows from our South African
institutional business in the years ahead. Over the period, we continued to attract net inflows to our international products from global asset allocators.
Our track record of significant value creation since inception shows:
- Global Houseview, our global balanced portfolio, has delivered a return of 17.1% p.a. (gross of fees) since launch in October 1993, 1.5% p.a. ahead of its peer
median.
- Domestic Houseview, our domestic balanced portfolio, has delivered a return of 16.7% p.a. (gross of fees) since launch in January 1998, 0.3% p.a. ahead of its
peer median.
Our specialist emerging market and Africa strategies also continue to build impressive long-term track records:
- The Coronation Global Emerging Markets Strategy has generated an annualised alpha of 5.0% (gross of fees) since inception in July 2008.
- In turn, the Africa Frontiers Strategy has outperformed its benchmark by 3.3% p.a. (gross of fees) since inception in October 2008.
Retail business
We are one of the country's foremost managers of collective investment schemes, with R225.9 billion in retail assets under management (September 2015:
R222.4 billion). Following a sustained period of rapid growth and disproportionate allocation of industry flows, our market share of long-term assets marginally
declined to 13.7% (September 2015: 14.6%) in line with management expectations. Total net outflows for the period were R11 billion.
Highlights across our domestic and international fund range are detailed below, reflecting 1st quartile rankings in their respective Morningstar categories:
- Coronation Top 20, a top-performing general equity fund since launch in October 2000, has outperformed its benchmark by 4.4% p.a. (net of fees) over this same
period.
- Coronation Balanced Plus, the no.1 balanced fund in South Africa since launch in April 1996, has outperformed its average competitor by 2.5% p.a. (net of
fees) over this same period.
- Coronation Capital Plus, the no.1 multi-asset medium equity fund since launch in July 2001, has outperformed inflation by 7.4% p.a. (net of fees) over this 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 this
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 this
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 1.3% p.a. (net of fees) over this 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 1.8% p.a. (net of fees) over this same period.
During the period, we successfully launched our tax-free investment offering and implemented a comprehensive fee and benchmark adjustment that will be completed
by 1 October 2016.
TRANSFORMATION
As a truly South African business, Coronation remains committed to achieving meaningful, sustainable and substantive transformation within the financial services
industry. As at 31 March 2016, we are 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 and more than half are female. At executive committee level, black representation is 75%, while
at board level this figure is 57%.
- We are 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 country's black stockbroking community.
- Our long-term investment in the upliftment of society since 1993 is reflected in our inspiring corporate social investment programmes.
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. After assessing any projected future cash requirements, a gross dividend of 229.0 cents per share has been declared for the interim period ended
31 March 2016, resulting in a net dividend of 194.65 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, 3 June 2016
Shares trade ex dividend Monday, 6 June 2016
Record date Friday, 10 June 2016
Payment date Monday, 13 June 2016
Share certificates may not be dematerialised or rematerialised between Monday, 6 June 2016 and Friday, 10 June 2016, 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
The sustainability of our business is rooted in our relentless commitment to long-term investing. We have a proven 23-year history, and a robust investment
philosophy and process that has generated enormous value for clients over the long term. We continue to put the best interests of our clients at the heart of all
our business decisions.
Markets are cyclical and typically turn when investors least expect it. Despite the recent rally, we expect asset price fluctuations to remain heightened as
investors react to the news of the day. It is in these periods of market turmoil that we are sowing the seeds for future long-term returns. In a world of change,
our commitment to identifying those opportunities that will generate long-term performance remains unchanged. Our success in achieving this objective will
continue to generate long-term value for all stakeholders.
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 2016 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
17 May 2016
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Full year
reviewed Reviewed Audited
31 March 31 March % 30 Sept
R million 2016 2015 Change 2015
Fund management activities
Revenue 2 067 2 167 (5) 4 442
Other income 6 9 28
Operating expenses (1 023) (1 035) (1) (2 090)
Share-based payment expense (4) (3) (11)
Other expenses (1 019) (1 032) (2 079)
Results from operating activities 1 050 1 141 (8) 2 380
Finance and dividend income 15 13 32
Finance expense (11) (6) (15)
Share of profit of equity-accounted investee 4 4 8
Profit from fund management 1 058 1 152 (8) 2 405
Income attributable to policyholder linked assets and investment partnerships 7 15 25
Net fair value gains on policyholder and investment partnership financial instruments 15 30 54
Administration expenses borne by policyholders and investors in investment partnerships (8) (15) (29)
Profit before income tax 1 065 1 167 (9) 2 430
Income tax expense (261) (306) (620)
Taxation on shareholder profits (254) (291) (595)
Taxation on policyholder investment contracts (7) (15) (25)
Profit for the period 804 861 (7) 1 810
Other comprehensive income (to be reclassified to profit and loss in future periods)
Foreign currency translation differences for foreign operations 33 26 99
Net change in fair value of available-for-sale financial assets 26 10 (46)
Other comprehensive income for the period 59 36 53
Total comprehensive income for the period 863 897 1 863
Profit attributable to:
- equity holders of the company 804 863 (7) 1 812
- non-controlling interest - (2) (2)
Profit for the period 804 861 1 810
Total comprehensive income attributable to:
- equity holders of the company 863 899 (4) 1 865
- non-controlling interest - (2) (2)
Total comprehensive income for the period 863 897 1 863
Earnings per share (cents)
- basic 229.7 246.8 (7) 517.9
- diluted 229.7 246.8 (7) 517.9
Note to the statement of comprehensive income
Headline earnings per share (cents)
- basic 229.7 246.7 (7) 516.0
- diluted 229.7 246.7 (7) 516.0
Dividend per share (cents)
- interim 229.0 246.0 (7) 246.0
- final 270.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
31 March 31 March 30 Sept
R million 2016 2015 2015
Assets
Intangible assets 1 088 1 088 1 088
Equipment 38 37 37
Investment in equity-accounted investees 38 37 41
Deferred tax asset 98 129 145
Investments backing policyholder funds and investments held through investment partnerships 68 704 74 698 66 256
Investment securities 1 079 619 751
Taxation receivable - - 2
Trade and other receivables 485 525 509
Cash and cash equivalents 498 581 728
Total assets 72 028 77 714 69 557
Liabilities
Long-term borrowings (note 3) 300 303 300
Deferred tax liabilities 68 80 78
Policyholder investment contract liabilities and liabilities to holders of interests
in investment partnerships 68 640 74 621 66 181
External investors in consolidated funds 241 - 124
Taxation payable 23 77 -
Trade and other payables 515 572 705
Total liabilities 69 787 75 653 67 388
Net assets 2 241 2 061 2 169
Equity
Share capital and premium 256 256 256
Retained earnings 1 617 1 669 1 757
Reserves 219 131 156
Total equity attributable to equity holders of the company 2 092 2 056 2 169
Non-controlling interest - 5 -
Non-controlling interest in consolidated funds (note 5) 149 - -
Total equity 2 241 2 061 2 169
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Full year
reviewed reviewed Audited
31 March 31 March 30 Sept
R million 2016 2015 2015
Cash flows from operating activities
Profit from fund management 1 058 1 152 2 405
Non-cash and other adjustments 15 (3) (21)
Operating profit before changes in working capital 1 073 1 149 2 384
Working capital changes (175) 77 238
Cash flows from policyholders and investment partnership activities 3 997 (5 287) (6 171)
Cash generated/(utilised) from operations 4 895 (4 061) (3 549)
Interest paid (11) (6) (15)
Income taxes paid (181) (234) (634)
Net cash from operating activities 4 703 (4 301) (4 198)
Cash flows from investing activities
Finance and dividend income 15 13 32
Acquisition of equipment (9) (21) (27)
Net acquisition of investment securities (31) (370) (435)
Net cash from investing activities (25) (378) (430)
Cash flows from financing activities
Issue of preference shares - 150 150
Dividends paid (944) (1 035) (1 896)
Net cash from financing activities (944) (885) (1 746)
Increase/(decrease) in cash and cash equivalents 3 734 (5 564) (6 374)
Net decrease in cash and cash equivalents - shareholders (263) (277) (203)
Net increase/(decrease) in cash and cash equivalents - policyholders and investment partnerships 3 997 (5 287) (6 171)
Cash and cash equivalents at beginning of period 8 567 14 842 14 842
Cash and cash equivalents at beginning of period - shareholders 728 832 832
Cash and cash equivalents at beginning of period - policyholders and investment partnerships 7 839 14 010 14 010
Effect of exchange rate fluctuations on cash held 33 26 99
Cash and cash equivalents at end of period 12 334 9 304 8 567
Cash and cash equivalents at end of period - shareholders 498 581 728
Cash and cash equivalents at end of period - policyholders and investment partnerships 11 836 8 723 7 839
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
Foreign attributable
Share currency Share-based Re- to equity Non-
capital and translation Retained payment valuation holders of the controlling Total
R million premium reserve earnings reserve reserve company interest equity
Balance at 30 September 2014 (audited) 256 64 1 841 11 17 2 189 7 2 196
Total comprehensiveincome for the period
Profit for the period 863 863 (2) 861
Other comprehensive income (to be reclassified to profit and loss in future periods)
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
Total comprehensive income for the period
Profit for the period 949 949 (2) 947
Other comprehensive income (to be reclassified to profit and loss in future periods)
Currency translation differences 73 73 73
Revaluation of available-for-sale financial assets (56) (56) (56)
- net change in fair value (51) (51) (51)
- reclassified to profit or loss on disposal (5) (5) (5)
Total other comprehensive income 73 (56) 17 17
Total comprehensive income for the period 73 949 (56) 966 (2) 964
Transactions with owners recorded directly to equity
Share-based payments 8 8 8
Dividends paid (861) (861) (861)
Closure of subsidiary (3) (3)
Total transactions with owners (861) 8 (853) (3) (856)
Balance at 30 September 2015 (audited) 256 163 1 757 22 (29) 2 169 2 169
Total comprehensive income for the period
Profit for the period 804 804 804
Other comprehensive income (to be reclassified to profit and loss in future periods)
Currency translation differences 33 33 33
Revaluation of available-for-sale financial assets 26 26 26
- net change in fair value 26 26 26
Total other comprehensive income 33 26 59 59
Total comprehensive income for the period 33 804 26 863 863
Transactions with owners recorded directly to equity
Share-based payments 4 4 4
Dividends paid (944) (944) (944)
Non-controlling interest in consolidated funds (note 5) 149 149
Total transactions with owners (944) 4 (940) 149 (791)
Balance at 31 March 2016 (reviewed) 256 196 1 617 26 (3) 2 092 149 2 241
EARNINGS PER SHARE
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2016 2015 2015
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 804 861 1 810
Non-controlling interest - 2 2
Earnings attributable to ordinary shareholders 804 863 1 812
Profit on disposal of financial assets available for sale - (1) (6)
Gain on disposal of group operations - - (1)
Headline earnings attributable to ordinary shareholders 804 862 1 805
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 Six months Six months Six months Six months
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 2016 2015 2015 2016 2015 2015 2016 2015 2015
Segment external revenue 1 404 1 403 3 008 663 764 1 434 2 067 2 167 4 442
Segment operating expenses (769) (637) (1 356) (254) (398) (734) (1 023) (1 035) (2 090)
Segment profit 635 766 1 652 409 366 700 1 044 1 132 2 352
Share of income of equity-accounted investee 4 4 8 - - - 4 4 8
Net finance and other income/(expenses) 19 7 27 (9) 9 18 10 16 45
Profit from fund management 658 777 1 687 400 375 718 1 058 1 152 2 405
Income* 7 15 25
Profit before income tax 1 065 1 167 2 430
Segment assets 1 362 1 209 1 373 738 553 652 2 100 1 762 2 025
Investments* 69 928 75 952 67 532
Total assets 72 028 77 714 69 557
* Income and investments are attributable to and backing policyholder funds and investments held through investment partnerships, consolidated funds 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 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 consolidated 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 period are similar to those disclosed in the group's annual financial statements for the year ended 30 September 2015.
No new significant related party transactions arose during the current period.
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 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 2016 (Reviewed)
Investments backing policyholder funds and investments held through investment partnerships 55 884 9 221 - 65 105
Investment securities 1 045 - 34 1 079
56 929 9 221 34 66 184
Policyholder, external investor and investment partnership liabilities 56 125 9 156 - 65 281
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, external investor and investment partnership liabilities 61 341 4 904 - 66 245
September 2015 (Audited)
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, external investor and investment partnership liabilities 56 909 6 003 - 62 912
During the current reporting period there were no transfers of financial assets between the levels.
5. NON-CONTROLLING INTEREST IN CONSOLIDATED FUNDS
The consolidation of the Coronation Global Frontiers Fund has given rise to a non-controlling interest in the current period.
Directors: S Pather (Chairman)*, A C Pillay (CEO), L Boyce*, 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
Registration number: 1973/009318/06
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001
JSE share code: CML
ISIN: ZAE000047353
Website: http://www.coronation.com
Sponsor: Deutsche Securities (SA) Proprietary Limited
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
Date: 17/05/2016 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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