Wrap Text
Reviewed Preliminary Condensed Consolidated Financial Results for the year ended 30 September 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 PRELIMINARY CONDENSED CONSOLIDATED FINANCIAL RESULTS
for the year ended 30 September 2016
- Assets under management of R599 billion, down 1.8%
- Diluted headline earnings per share of 447.6 cents, down 13.3%
- Total dividend per share of 447 cents
Coronation Fund Managers Limited (Coronation) delivered results that are in line with management expectations for the 12 months to 30 September 2016. Amid heightened
levels of volatility, our client portfolios produced encouraging performance as they continued to benefit from significant inflection points in emerging markets and
commodities at the start of the calendar year. For the 12-month period, the MSCI Emerging Markets Index delivered a 16.8% return, versus the 12.0% of the MSCI All
Country World Index (both in US dollar terms). The FTSE/JSE All Share Index generated a return of 6.6% for the period. Following significant declines in the final
quarter of 2015, the rand recovered to strengthen by 0.8% against the US dollar (to close at R13.72), and by 0.2% against the euro (to close at R15.42) over the
12-month period.
Results
As a cyclical business, Coronation's revenue stream is highly geared to the returns of the market and the level of outperformance it generates on behalf of its
clients. Due to a decline in the level of performance fees generated compared to the prior corresponding period, combined with the impact of the implementation of our
new retail fee structure, revenue for the current period declined by 9.0% to R4.0 billion (September 2015: R4.4 billion). This, in turn, led to a 13.3% decline in
diluted headline earnings per share to 447.6 cents (September 2015: 516.0 cents).
Assets under management declined to R599 billion (September 2015: R610 billion) over the period on the back of total net outflows of R79 billion, the bulk of which
were offset by capital appreciation.
Business update
We are an active manager with a valuation-driven investment philosophy. The key driver of our success is our ability to create long-term value on behalf of clients.
Both our institutional and retail businesses are acknowledged as industry leaders in the South African market.
Over our 23-year history, we have built a compelling track record of producing outperformance on behalf of clients. Very few fund managers deliver market-beating
portfolios over multi-decade periods as Coronation has done. A key illustration of this is our flagship domestic equity portfolio, Houseview Equity, which has
produced an active return of 3% p.a. (gross of fees) since its inception in 1993.
Institutional business
We are a significant manager of institutional assets in South Africa. We manage assets for more than 80% of the top 200 retirement funds in the country, which
constitutes a total market share of close to 15%. Our client portfolios total R374 billion (September 2015: R387 billion).
We operate in a net outflow market within the South African retirement space, which coupled with portfolio rebalancing, contributed to a total net outflow of R61
billion from our institutional business for the year. Furthermore, we remain closed to new investors in our top-performing SA Equity and Multi-Asset portfolios, a
decision implemented more than four years ago to protect the investment outcomes for our existing clients.
The long-term track records of our global portfolios remain hugely compelling and continue to attract the attention of international investors.
- The Coronation Global Emerging Markets Equity Strategy has generated an active return of 5.2% p.a. (gross of fees) since inception in July 2008.
We are proud of the compelling investment returns achieved by our institutional clients who have been invested with us for the long term:
- more than 95% of our institutional portfolios have outperformed their respective benchmarks over the past 10 years;
- 100% of our institutional portfolios have outperformed their benchmarks over the past 20 years; and
- more than 95% of those clients who have been invested with us for more than 10 years have outperformed their benchmarks since inception.
Retail business
We are one of the country's foremost managers of long-term assets in the collective investment schemes industry, with a market share of 13.1% (September 2015: 14.6%).
As anticipated, following a sustained period of rapid growth and disproportionate allocation of industry flows, our fund range experienced net outflows, totalling R18
billion for the year. Total retail assets under management are R225 billion (September 2015: R222 billion).
Coronation was named runner-up Raging Bull South African Management Company of the Year and runner-up Best Large Fund House at the 2016 Morningstar South Africa
Awards. 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, has outperformed its benchmark by 4.8% p.a.(net of fees) since inception in October 2000.
- Coronation Balanced Plus, the no. 1 balanced fund in South Africa since its launch in April 1996, has outperformed its average competitor by 2.5% p.a.(net of fees)
over the past 20 years.
- Coronation Capital Plus, the no. 1 multi-asset medium equity fund since its inception in July 2001, has outperformed inflation by 7.2% p.a.(net of fees) over the
15-year period.
- Coronation Balanced Defensive, a top-performing conservative fund, has outperformed inflation by 4.2% p.a. (net of fees) since its launch in February 2007.
- Coronation Strategic Income, the no. 1 multi-asset income fund since its 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 its launch in August 1997, has outperformed the global equity market
by 1.1% p.a. (net of fees) over its almost 20-year history.
- Coronation Global Managed [ZAR] Feeder, the no. 1 global multi-asset high equity fund in South Africa since its launch in October 2009, has outperformed its average
competitor by 1.4% p.a. (net of fees) over this same period.
We successfully implemented a comprehensive fee and benchmark adjustment across our retail fund range during the year. This process was completed on 1 October 2016.
Transformation
Coronation is a truly South African business that is committed to transformation. We continue to build on the meaningful and sustainable transformation achieved in
all areas of our business, as well as within the financial services industry. Key highlights include:
- Coronation is 21.5% black owned, as measured by the Financial Sector Charter, which includes our employee-owned empowerment vehicle, the Imvula Trust.
- More than half of our total employee complement in South Africa are black, of which more than 60% are female.
- Within our South African-focused investment team, three out of four leadership roles are held by black employees, while 43% of our senior portfolio managers are black.
- At executive committee level, black representation is 75%, while at board level the figure is 57%.
- The highly successful Coronation Business Support Programme, which has directly benefited nine black South African stockbroking companies over the past decade, has
inspired the creation of a broader industry programme. This new initiative, launched on 1 August 2016, is a collaboration between the Association for Savings and
Investment South Africa (Asisa) and six leading industry participants (sponsors), of which Coronation is one.
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 218.0 cents per share has been declared for the year ended
30 September 2016, which has resulted in a final net dividend of 185.3 cents per share for shareholders subject to Dividends Tax (DT). Together with the interim gross
dividend of 229.0 cents per share, this amounts to a total gross dividend of 447.0 cents per share for the year.
Last day to trade Tuesday, 6 December 2016
Shares trade ex dividend Wednesday, 7 December 2016
Record date Friday, 9 December 2016
Payment date Monday, 12 December 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 7 December 2016 and Friday, 9 December 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 anchored in our relentless commitment to long-term investing. As an active manager, volatile markets create opportunities for
the patient, long-term investor to take positions that will ultimately deliver compelling returns for clients over meaningful periods of time. The recent performance
of our funds is encouraging and gives us confidence for the years ahead.
While the likelihood of continued near-term volatility and uncertainty persists, our robust investment philosophy and approach continue to act as a compass, which
enables us to make the appropriate long-term decisions for the benefit of our clients. Our success in achieving this will generate long-term value for all
stakeholders.
External audit review
The external auditor, EY, reviewed the preliminary condensed consolidated statements of financial position of Coronation as at 30 September 2016 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
15 November 2016
Any forward-looking information contained in this announcement has not been reviewed or reported on by the company's external auditors.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
30 Sept 30 Sept
2016 2015 %
R million R million Change
Fund management activities
Revenue 4 046 4 442 (9)
Other income 20 28
Operating expenses (2 019) (2 090) (3)
Share-based payment expense (7) (11)
Other expenses (2 012) (2 079)
Results from operating activities 2 047 2 380 (14)
Finance and dividend income 35 32
Finance expense (22) (15)
Share of profit of equity-accounted investee 9 8
Profit from fund management 2 069 2 405 (14)
Income attributable to policyholder linked assets and investment partnerships 20 25
Net fair value gains on policyholder and investment partnership financial instruments 58 54
Administration expenses borne by policyholders and investors in investment partnerships (38) (29)
Profit before income tax 2 089 2 430 (14)
Income tax expense (515) (620)
Taxation on shareholder profits (495) (595)
Taxation on policyholder investment contracts (20) (25)
Profit for the year 1 574 1 810 (13)
Other comprehensive income (to be reclassified to profit or loss in future periods) 37 53
Foreign currency translation differences for foreign operations (8) 99
Net change in fair value of available-for-sale financial assets 45 (46)
Total comprehensive income for the year 1 611 1 863
Profit attributable to:
- equity holders of the company 1 574 1 812 (13)
- non-controlling interest - (2)
Profit for the year 1 574 1 810
Total comprehensive income attributable to:
- equity holders of the company 1 611 1 865 (14)
- non-controlling interest - (2)
Total comprehensive income for the year 1 611 1 863
Earnings per share (cents)
- basic 450.0 517.9 (13)
- diluted 450.0 517.9 (13)
Note to the statement of comprehensive income
Headline earnings per share (cents)
- basic 447.6 516.0 (13)
- diluted 447.6 516.0 (13)
Dividend per share (cents)
- interim 229.0 246.0 (7)
- final 218.0 270.0 (19)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
30 Sept 30 Sept
2016 2015
R million R million
Assets
Intangible assets 1 088 1 088
Equipment 31 37
Investment in equity-accounted investees 37 41
Deferred tax asset 162 145
Investments backing policyholder funds and investments held through investment partnerships 64 007 66 256
Investment securities 1 097 751
Taxation receivable - 2
Trade and other receivables 498 509
Cash and cash equivalents 538 728
Total assets 67 458 69 557
Liabilities
Long-term borrowings (note 3) 150 300
Deferred tax liabilities 25 78
Policyholder investment contract liabilities and liabilities to holders of interests in investment partnerships 63 988 66 181
Short-term portion of long-term borrowings (note 3) 150 -
External investors in consolidated funds 269 124
Taxation payable 4 -
Trade and other payables 694 705
Total liabilities 65 280 67 388
Net assets 2 178 2 169
Equity
Share capital and premium 256 256
Retained earnings 1 586 1 757
Reserves 200 156
Total equity attributable to equity holders of the company 2 042 2 169
Non-controlling interest in consolidated funds (note 5) 136 -
Total equity 2 178 2 169
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
30 Sept 30 Sept
2016 2015
R million R million
Cash flows from operating activities
Profit from fund management 2 069 2 405
Non-cash and other adjustments 27 (21)
Operating cash flows before changes in working capital 2 096 2 384
Working capital changes (18) 238
Cash flows from policyholder and investment partnership activities 833 (6 171)
Cash generated from/(utilised by) operations 2 911 (3 549)
Interest paid (22) (15)
Income taxes paid (502) (634)
Net cash from operating activities 2 387 (4 198)
Cash flows from investing activities
Finance and dividend income 35 32
Acquisition of equipment (13) (27)
Net acquisition of investment securities (13) (435)
Net cash from investing activities 9 (430)
Cash flows from financing activities
Issue of preference shares - 150
Dividends paid (1 745) (1 896)
Net cash from financing activities (1 745) (1 746)
Increase/(decrease) in cash and cash equivalents 651 (6 374)
Net decrease in cash and cash equivalents - shareholders (182) (203)
Net increase/(decrease) in cash and cash equivalents - policyholders and investment partnerships 833 (6 171)
Cash and cash equivalents at beginning of year 8 567 14 842
Cash and cash equivalents at beginning of year - shareholders 728 832
Cash and cash equivalents at beginning of year - policyholders and investment partnerships 7 839 14 010
Effect of exchange rate fluctuations on cash held (8) 99
Cash and cash equivalents at end of year 9 210 8 567
Cash and cash equivalents at end of year - shareholders 538 728
Cash and cash equivalents at end of year - policyholders and investment partnerships 8 672 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.
EARNINGS PER SHARE
Reviewed Audited
30 Sept 30 Sept
2016 2015
R million R million
Earnings attributable to shareholders 1 574 1 810
Non-controlling interest - 2
Earnings attributable to ordinary shareholders 1 574 1 812
Profit on disposal of financial assets available for sale (7) (6)
Profit on disposal of group operations (2) (1)
Headline earnings attributable to ordinary shareholders 1 565 1 805
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued
capital and
reserves
attributable
Share Foreign Share- to equity
capital currency based Re- holders Non-
and translation Retained payment valuation 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 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 to 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 (audited) 256 163 1 757 22 (29) 2 169 - 2 169
Total comprehensive income for the year
Profit for the year 1 574 1 574 1 574
Other comprehensive income
(available to be recycled to profit and loss in future periods)
Currency translation differences (8) (8) (8)
Revaluation of available-for-sale financial assets 45 45 45
- net change in fair value 52 52 52
- reclassified to profit or loss on disposal (7) (7) (7)
Total other comprehensive income - (8) - - 45 37 - 37
Total comprehensive income for the year - (8) 1 574 - 45 1 611 - 1 611
Transactions with owners recorded directly to equity
Share-based payments 7 7 7
Dividends paid (1 745) (1 745) (1 745)
Non-controlling interest in consolidated funds (note 5) 136 136
Total transactions with owners - - (1 745) 7 - (1 738) 136 (1 602)
Balance at 30 September 2016 (reviewed) 256 155 1 586 29 16 2 042 136 2 178
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 2016 2015 2016 2015 2016 2015
Segment external revenue 2 690 3 008 1 356 1 434 4 046 4 442
Segment operating expenses (1 501) (1 356) (518) (734) (2 019) (2 090)
Segment profit 1 189 1 652 838 700 2 027 2 352
Share of income of equity- accounted investee 9 8 - - 9 8
Net finance and other income/(expense) 36 27 (3) 18 33 45
Profit from fund management 1 234 1 687 835 718 2 069 2 405
Income* 20 25
Profit before income tax 2 089 2 430
Segment assets 1 286 1 373 878 652 2 164 2 025
Investments* 65 294 67 532
Total assets 67 458 69 557
* Income and investments are attributable to and backing policyholder funds and investments held through investment partnerships and other assets.
DILUTED NUMBER OF SHARES
Reviewed Audited
30 Sept 30 Sept
2016 2015
'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
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 2015. No new significant related party transactions arose during the current year.
3. Long-term and short-term borrowings
Cumulative redeemable preference shares with dividends linked to prime are payable on a quarterly basis, with R150m capital repayments due on
31 March 2017 and 31 March 2018.
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. Cash and cash equivalent balances along with their related liabilities of R2 170 million
(2015: R3 272 million) have been excluded from the below table in current and prior years respectively.
- Level 3: Inputs for the asset or liability that are not based on observable market data (significant unobservable inputs).
R million Level 1 Level 2 Level 3 Total
September 2016 (reviewed)
Investments backing policyholder funds and investments held through investment partnerships 54 520 7 317 - 61 837
Investment securities 1 060 - 37 1 097
55 580 7 317 37 62 934
Policyholder, external investor and investment partnership liabilities 54 789 7 298 - 62 087
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 year, a net amount of R381 million in debentures were transferred from Level 2 to Level 1 as these are now considered to be held
in an active market.
The carrying amount of all other financial assets and liabilities approximate fair value.
5. Non-controlling interest in consolidated funds
The non-controlling interest in consolidated funds arises as a result of the continued consolidation of the Coronation Global Frontiers Fund.
Directors: S Pather (Chairman)*, A C Pillay (CEO), J A Snalam (CFO), L Boyce*, J G February*, J D McKenzie*, H A Nelson*, 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 (Anon-banking member of the Deutsche Bank Group)
Date: 15/11/2016 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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