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CML
CML
CML - Coronation Fund Managers - Reviewed interim results for the six months
ended 31 March 2007
Coronation Fund Managers Limited
(Incorporated in the Republic of South Africa)
Registration number 1973/009318/06
Share code: CML
ISIN: ZAE000047353
("Coronation Fund Managers" or "the Company")
Reviewed interim results for the six months ended 31 March 2007
HIGHLIGHTS
Assets under management increased to R125 billion, up 24%
Profit from fund management increased to R187 million, up 28%
Earnings per share increased to 36 cents, up 49%
Maiden interim capital repayment of 20 cents per share
Coronation again produced a strong set of financial results for the six months
ended 31 March 2007, entrenching its standing as one of the country`s most
successful fund management companies. This was achieved through the delivery of
investment excellence across all client portfolios.
Thys du Toit, CEO commented: "We achieved this strong set of results through the
delivery of investment excellence across all client portfolios. We strive to
achieve consistent superior investment performance that will extend beyond
financial market cyclicality. However, we caution stakeholders against straight-
line projections. We are well placed to weather the ebbs and flows of the
markets to achieve long-term investment excellence for the benefit of all our
stakeholders."
Enquiries:
Coronation Fund Managers 021 680 2400
Thys du Toit, CEO 021 680 2015
John Snalam, CFO 021 680 2094
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
RESULTS
Revenue for the six-month period ended 31 March 2007 comprising annual recurring
fees and performance fees, increased by 25% to R423 million from R338 million
for the comparable period to 31 March 2006. These fees are prior to the
deduction of distribution costs and fees paid to financial intermediaries.
Coronation Fund Managers has traditionally followed a variable cost business
model which results in lower profit volatility. Total operating costs inclusive
of variable costs such as remuneration, distribution fees and administration
costs increased by 25% to R257 million, resulting in an increase in profit from
fund management to R187 million, up 28% from R146 million for the six-month
period to 31 March 2006.
Earnings per share, however, increased by 49% to 36 cents and headline earnings
per share increased by 43% to 34,7 cents. The higher rate of increase was due to
a lower effective tax rate and to the positive impact of the share buyback
programme during the second half of 2006, when 35 million ordinary shares were
bought back and cancelled.
ASSETS UNDER MANAGEMENT
Total assets under management increased by 24% to R125 billion as at 31 March
2007 from R101 billion as at 30 September 2006. Coronation Fund Managers
continues to capitalise on its leading market position and strong investment
performance attracting particularly strong unit trust inflows.
INVESTMENT EXCELLENCE
In line with our objective to deliver long-term investment excellence, the
investment views which contributed to disappointing investment returns in mid-
2006 have been vindicated by strong outperformance over the past six months.
This is best illustrated in the numerous industry performance surveys, ranking
tables and awards that we have received:
In the most recent Alexander Forbes Large Manager Watch (to end March 2007), our
domestic balanced portfolios ranked 3rd over one year and 2nd over three and
five-year periods.
Coronation Fund Managers took second place in the Personal Finance/Raging Bull
Unit Trust Company of the Year Award for 2006. This award is given for
consistency of investment performance across a management company`s entire fund
range, and it is one in which Coronation has taken 1st or 2nd place every year
since 2001.
The Coronation Granite Fixed Income Fund was awarded the `South Africa Hedge
Fund Award` for the Best Fixed Income Hedge Fund in 2006.
At the 2007 Financial Mail/Standard & Poor`s Fund Awards, Coronation Fund
Managers was runner-up in the Best Larger Group category and received six `Best
in Sector` awards as well as a further six runner-up awards for individual
funds.
TRANSFORMATION AND BEE
Transformation is a key component of our business ethos. We believe that adding
to the diversity of our human capital allows us to build a long-term sustainable
business for the benefit of all stakeholders. More than 50% of our South African
staff complement is black.
At the recent Community Growth Socially Responsible Investing Awards, Coronation
Fund Managers was placed second in the Financial Services category. Our equity
empowerment partner remains our black staff, all of whom are beneficiaries of
the Imvula Trust. In 2005 the Imvula Trust bought 10% of the operating
businesses of Coronation Fund Managers, the bulk of the proceeds of the sale
being distributed to shareholders.
CAPITAL REPAYMENT
A major objective has been to reward shareholders through regular and
significant distributions of earnings or return of capital. This objective will
be enhanced through the declaration of a maiden interim return of capital. The
basis on which the current distribution is calculated mirrors that of previous
distributions. We repay capital equal to 75% of after-tax profits generated
during the period, increased to take account of the non-cash impact of share-
based payment charges that will not result in the issue of additional shares.
This would amount to a capital repayment of 30 cents per share, but at this
interim stage we have decided to only distribute two thirds of that, which
translates to 20 cents per share.
The capital repayment will be paid out of the Company`s share premium account.
Capital repayments were approved by shareholders at the Annual General Meeting
held in January 2007.
In compliance with the Listings Requirements of the JSE Limited, the following
dates are applicable:
Last day to trade Friday, 1 June 2007
Shares trade ex the capital repayment Monday, 4 June 2007
Record date Friday, 8 June 2007
Payment date Monday, 11 June 2007
Share certificates may not be dematerialised or rematerialised between Monday, 4
June 2007, and Friday, 8 June 2007, both dates inclusive.
PROSPECTS
We strive to achieve consistent and superior investment performance both for the
benefit of our clients and to sustain our sound business model that extends
beyond financial market cyclicality. However, we caution stakeholders against
straight-line projections.
Although the positive economic outlook signals greater opportunities for
Coronation Fund Managers, we must highlight that the performance of the domestic
equity market over the past four years has been exceptional. We are cognisant
that a significant portion of our revenue is attributable to the financial
markets which by their nature can be volatile and cyclical. However, we are
confident that we are well placed to weather the ebbs and flows of the markets.
The business has a diversified and loyal client base, a great investment track
record, strong cash flows, healthy balance sheet, aligned interest between all
stakeholders, a diversified revenue stream and is singularly focused on fund
management.
INDEPENDENT REVIEW BY THE AUDITORS
KPMG Inc, the group`s independent auditor, has reviewed the condensed
consolidated interim financial statements contained in this report. Their
unmodified review report is available for inspection at the Company`s registered
office.
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2007 2006 % 2006
R`000 R`000 Change R`000
Fund management activities
Revenue 422 524 337 567 25 706 238
Financial income 27 860 19 392 44 36 054
Interest and dividend income 12 712 10 818 21 614
Other income 15 148 8 574 14 440
Operating expenses (257 202) (205 385) 25 (436 593)
Share-based payment expense (17 089) (25 822) (51 384)
Other expenses (240 113) (179 563) (385 209)
Interest expense (6 729) (6 200) (13 005)
Share of profit of associate 919 863 1 799
Profit from fund management 187 372 146 237 28 294 493
Income attributable to
policyholder linked assets
and investment partnerships 35 850 23 737 43 168
Net fair value gains on
policyholder and investment
partnership financial
instruments 45 501 25 784 48 982
Administration expenses borne
by policyholders and
investors in investment
partnerships (9 651) (2 047) (5 814)
Profit before tax 223 222 169 974 337 661
Income tax expense (96 052) (76 816) (141 207)
Taxation on shareholder
profits (60 202) (53 079) (98 039)
Taxation on policyholder
investment contracts (35 850) (23 737) (43 168)
Profit for the period 127 170 93 158 37 196 454
Attributable to:
- equity holders of the
company 127 009 93 158 36 196 454
- minority interest 161 - -
Profit for the period 127 170 93 158 196 454
Earnings per share (cents)
- basic 36,0 24,2 49 51,9
- diluted 32,2 21,5 50 46,8
Note to the income statement
Headline earnings per share
(cents)
- basic 34,7 24,2 43 51,9
- diluted 31,1 21,5 45 46,8
Capital distribution per
share (cents)
- payable 20 - 53,0
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R`000 Share Foreign Accumulated Share-
capital and currency earnings based
premium translation payment
reserve reserve
Balance at 30 September 1 172 550 (11 247) 121 657 21 607
2005
Currency translation (3 813)
differences
Revaluation of
financial assets
available-for-sale
Net income recognised (3 813)
directly in equity
Profit for the period 93 158
Total recognised income (3 813) 93 158
and expense for the
period
Share-based payment 25 822
reserve
Dividends paid (745)
Capital distribution (138 197)
Shares issued 5 502
Acquisition of minority
interest
Balance at 31 March 1 039 855 (15 060) 214 070 47 429
2006
Currency translation 26 257
differences
Revaluation of
financial assets
available-for-sale
- Revaluation gains
taken to equity
- Transferred to profit
or loss on disposal
Net income recognised 26 257
directly in equity
Profit for the period 103 296
Total recognised income 26 257 103 296
and expense for the
period
Share-based payment 25 562
reserve
Dividends paid (474)
Shares issued 3 465
Shares repurchased and (200 167)
cancelled
Balance at 30 September 843 153 11 197 316 892 72 991
2006
Currency translation (6 655)
differences
Revaluation of
financial assets
available-for-sale
- Revaluation gains 5 276
taken to equity
- Transferred to profit (4 448)
or loss on disposal
Net income recognised (6 655)
directly in equity
Profit for the period 127 009
Total recognised income (6 655) 127 009
and expense for the
period
Minority interest at
acquisition of
subsidiary
Share-based payment 17 089
reserve
Dividends paid (861)
Capital distribution (185 276)
Shares issued 12 306
Shares repurchased and (13 071)
cancelled
Balance at 31 March 657 112 4 542 443 040 90 080
2007
R`000 Revaluation Issued Minority Total
reserve capital and interest equity
reserves
attributabl
e
to equity
holders of
the company
Balance at 30 September 3 289 1 307 856 586 1 308 442
2005
Currency translation (3 813) - (3 813)
differences
Revaluation of 6 842 6 842 - 6 842
financial assets
available-for-sale
Net income recognised 6 842 3 029 - 3 029
directly in equity
Profit for the period 93 158 - 93 158
Total recognised income 6 842 96 187 - 96 187
and expense for the
period
Share-based payment 25 822 - 25 822
reserve
Dividends paid (745) - (745)
Capital distribution (138 197) - (138 197)
Shares issued 5 502 - 5 502
Acquisition of minority - (586) (586)
interest
Balance at 31 March 10 131 1 296 425 - 1 296 425
2006
Currency translation 26 257 - 26 257
differences
Revaluation of (4 328) (4 328) - (4 328)
financial assets
available-for-sale
Revaluation gains taken 588 588 - 588
to equity
Transferred to profit (4 916) (4 916) - (4 916)
or loss on disposal
Net income recognised (4 328) 21 929 - 21 929
directly in equity
Profit for the period 103 296 - 103 296
Total recognised income (4 328) 125 225 - 125 225
and expense for the
period
Share-based payment 25 562 - 25 562
reserve
Dividends paid (474) - (474)
Shares issued 3 465 - 3 465
Shares repurchased and (200 167) - (200 167)
cancelled
Balance at 30 September 5 803 1 250 036 - 1 250 036
2006
Currency translation (6 655) - (6 655)
differences
Revaluation of 828 828 - 828
financial assets
available-for-sale
Revaluation gains taken 5 276 5 276 - 5 276
to equity
Transferred to profit (4 448) (4 448) -
or loss on disposal (4 448)
Net income recognised 828 (5 827) - (5 827)
directly in equity
Profit for the period 127 009 161 127 170
Total recognised income 828 121 182 161 121 343
and expense for the
period
Minority interest at - 5 925 5 925
acquisition of
subsidiary
Share-based payment 17 089 - 17 089
reserve
Dividends paid (861) - (861)
Capital distribution (185 276) - (185 276)
Shares issued 12 306 - 12 306
Shares repurchased and (13 071) - (13 071)
cancelled
Balance at 31 March 6 631 1 201 405 6 086 1 207 491
2007
CONDENSED CONSOLIDATED BALANCE SHEET
Reviewed Reviewed Audited
31 March 31 March 30 Sept
2007 2006 2006
R`000 R`000 R`000
Assets
Intangible assets 1 092 869 1 087 772 1 087 772
Equipment 7 031 5 382 5 932
Investment in associate - 9 733 11 021
Deferred tax asset 3 188 3 223 2 044
Investments backing policyholder 17 542 785 16 230 675 15 782 142
funds and investments held through
investment partnerships
Financial assets available-for- 73 485 69 917 87 327
sale
Financial assets at fair value 74 767 63 431 64 804
through profit or loss
Trade and other receivables 119 084 97 783 97 637
Cash and cash equivalents 236 211 287 522 253 590
Total assets 19 149 420 17 855 438 17 392 269
Liabilities
Interest-bearing borrowing 132 625 145 510 139 533
Deferred tax liabilities 64 235 18 755 39 906
Policyholder investment contract 17 481 183 16 213 400 15 743 747
liabilities and liabilities to
holders of interests in investment
partnerships
Income tax payable 72 235 65 564 78 955
Trade and other payables 191 561 115 332 140 092
Shareholders for dividend 90 452 -
Total liabilities 17 941 929 16 559 013 16 142 233
Net assets 1 207 491 1 296 425 1 250 036
Equity
Share capital and premium 657 112 1 039 855 843 153
Accumulated earnings 443 040 214 070 316 892
Reserves 101 253 42 500 89 991
Total equity attributable to 1 201 405 1 296 425 1 250 036
equity holders of the company
Minority interest 6 086 - -
Total equity 1 207 491 1 296 425 1 250 036
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2007 2006 2006
R`000 R`000 R`000
Profit for the period 127 170 93 158 196 454
Income tax expense 96 052 76 816 141 207
Non-cash and other adjustments (23 463) 15 350 11 397
Operating profit before changes in 199 759 185 324 349 058
working capital
Working capital changes 38 839 19 577 45 352
Cash generated from operations 238 598 204 901 394 410
Interest paid (6 712) (6 200) (13 874)
Income taxes paid (75 359) (40 653) (69 323)
Net cash from operating activities 156 527 158 048 311 213
Net cash from investing activities 26 559 23 012 13 264
Net cash used in financing (193 810) (135 477) (339 083)
activities
- distributions to shareholders (186 137) (138 490) (139 416)
- other (7 673) 3 013 (199 667)
Net (decrease)/increase in cash (10 724) 45 583 (14 606)
and cash equivalents
Cash and cash equivalents at 253 590 245 752 245 752
beginning of period
Exchange rate adjustments (6 655) (3 813) 22 444
Cash and cash equivalents at end 236 211 287 522 253 590
of period
CONDENSED CONSOLIDATED SEGMENT REPORT - AFRICA
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
R`000 2007 2006 2006
Segment revenue 379 788 302 763 632 833
Segment operating (225 491) (181 211) (372 776)
expenses
Segment result 154 297 121 552 260 057
Segment financial income 21 332 19 785 27 444
Segment interest expense (6 729) (6 200) (13 000)
Segment share of profit 919 863 1 799
of associate
Segment profit from fund 169 819 136 000 276 300
management
CONDENSED CONSOLIDATED SEGMENT REPORT - INTERNATIONAL
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
R`000 2007 2006 2006
Segment revenue 42 736 34 804 73 405
Segment operating expenses (31 711) (24 174) (63 817)
Segment result 11 025 10 630 9 588
Segment financial income 6 528 (393) 8 610
Segment interest expense - - (5)
Segment share of profit of - - -
associate
Segment profit from fund 17 553 10 237 18 193
management
CONDENSED CONSOLIDATED SEGMENT REPORT - Group
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
R`000 2007 2006 2006
Segment revenue 422 524 337 567 706 238
Segment operating expenses (257 202) (205 385) (436 593)
Segment result 165 322 132 182 269 645
Segment financial income 27 860 19 392 36 054
Segment interest expense (6 729) (6 200) (13 005)
Segment share of profit of 919 863 1 799
associate
Segment profit from fund 187 372 146 237 294 493
management
EARNINGS PER SHARE
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2007 2006 2006
Weighted average number of
ordinary shares in issue during
the period 353 181 887 383 360 748 376 670 543
Weighted average number of
ordinary shares potentially in
issue 393 841 193 433 598 748 424 484 529
R`000 R`000 R`000
Earnings attributable to
shareholders 127 009 93 158 196 454
Dividend on convertible
cumulative redeemable
preference shares - (452) (926)
Earnings attributable to
ordinary shareholders 127 009 92 706 195 528
Gain on disposal of financial
assets available-for-sale (4 448) - -
Profit on disposal of equipment - (2) (13)
Headline earnings attributable
to ordinary shareholders 122 561 92 704 195 515
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation and accounting policies
The condensed consolidated interim financial statements for the six months ended
31 March 2007 have been prepared in compliance with the Listings Requirements of
the JSE Limited, International Financial Reporting Standards (IFRS) IAS 34
Interim Financial Reporting and the South African Companies Act, 1973, as
amended.
The accounting policies applied in the presentation of the condensed
consolidated interim financial statements are consistent with those applied for
the year ended 30 September 2006.
These condensed consolidated interim financial statements have been prepared in
accordance with the historic cost convention except for certain financial
instruments which are stated at fair value. The condensed consolidated interim
financial statements are presented in rand, rounded to the nearest thousand.
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. Acquisition of business
With effect from 1 February 2007, the group`s effective shareholding in Namibia
Asset Management Limited was increased to 54,9% and it has been consolidated
from that date.
Directors: G M C Ryan* (Chairman), M M du Toit (Chief Executive Officer), W T
Floquet*+, L F Stassen, S Pather*+
(* Non-executive + Independent)
Registered office: Coronation House, Boundary Terraces, 1 Mariendahl Lane,
Newlands 7700
Postal address: PO Box 993, Cape Town 8000
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg 2001
15 May 2007
Cape Town
Sponsor to Coronation Fund Managers:
Deutsche Securities (SA) (Proprietary) Limited
Date: 15/05/2007 08:05:01 Produced by the JSE SENS Department.
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