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CML
CML
CML - Coronation Fund Managers Limited - Reviewed interim results for the six
months ended 31 March 2008
Coronation Fund Managers Limited
(Incorporated in the Republic of South Africa)
Registration number: 1973/009318/06
Share code: CML
ISIN: ZAE000047353
("Coronation" or "the Company")
Reviewed interim results for the six months ended 31 March 2008
Assets under management R136 billion (+11%)
Cash flow generated from operations R199 million (-17%)
Profit from fund management R156 million (-17%)
Headline earnings per share 26.6 cents (-23%)
Hugo Nelson, CEO, commented: "We are pleased to have maintained our revenue
earned compared to the corresponding period, despite a 64% decrease in
performance fees in volatile market conditions. We have seen encouraging volume
gains in our fixed income portfolios in particular.
"The outlook for the financial markets suggests that market volatility will
continue for the foreseeable future.
"Although this undoubtedly will have an impact on profitability of the Company
over the next six months, we are confident that we have the right strategy,
business model and investment philosophy focused on delivering superior long-
term investment returns for our clients."
Enquiries:
Coronation Fund Managers
021 680 2000
Hugo Nelson, CEO
John Snalam, CFO
College Hill
011 447 3030
Johannes van Niekerk
082 921 9110
The past six-month period has been characterised by negative global market
sentiment which extended to global emerging markets, triggering an
indiscriminate sell-off in the South African financial and industrial sectors.
Against the backdrop of this market turmoil we are pleased to announce that the
business has produced a satisfactory set of financial results for the six months
ended 31 March 2008.
Results
In our voluntary market update announcement on 30 January 2008, we cautioned
that the slowdown in revenue growth and the dividend tax charge accounted for in
the current six-month period would result in earnings being lower than the
previous corresponding period.
Despite a 64% fall in performance fees, revenue for the six-month period ended
31 March 2008, comprising annual recurring fees and performance fees, remained
flat compared with the previous comparable period at R421 million (2007: R423
million).
Operating expenses of R269 million increased by 5% from the R257 million
reported to 31 March 2007. A significant contributor to this increase was
distribution costs which, whilst being variable, are nevertheless paid on the
fixed component of fee revenue on a higher asset base. A further negative cost
impact arises in the taxation charge where a secondary tax on companies charge
of R15.1 million was accounted for in the current six-month period. A similar
charge was not incurred in the previous comparable period, when a capital
distribution was paid.
Earnings per share of 27.4 cents are 24% lower than the 2007 interim figure of
36.0 cents and headline earnings per share of 26.6 cents are 23% lower (2007:
34.7 cents). The earnings per share and headline earnings per share figures for
the current six-month period, in relation to the equivalent numbers for the
previous comparable period, have been positively impacted by 9% due to the
effect of the share buy-back (and cancellation) programme embarked upon during
the 2006 and 2007 financial years.
Assets under management
Amid extreme market turmoil we are pleased to report that assets under
management increased to R136 billion as at 31 March 2008 (R125 billion as at 31
March 2007). A significant proportion of this growth is attributable to our
success in the fixed interest market, further entrenching Coronation as a
manager across asset classes.
Long-term investing
We remain singularly focused on fund management and the ongoing support of our
clients is vital to our success. Our philosophy of investing with a long-term
time horizon and our commitment to proprietary research has, amid the volatility
and indiscriminate market sell-off, given us the opportunity to strengthen our
positioning in high conviction calls.
Future focus
We continue to invest considerable resources and effort in building a
sustainable business. We have embarked on a number of business initiatives that
will, in due course, add to our revenue and profitability:
PPS Investments
PPS Investments, the investment arm of The Professional Provident Society,
continues to gain traction in the marketplace.
Private Equity
We have started to build a private equity offering that will enable our clients
to broaden their asset allocation to alternative investments. A team of three
professionals joined the business in November 2007 and are located in our
Johannesburg office.
International product offering
Pending regulatory approval, we are set to launch a comprehensive range of
international funds to both institutional and individual investors.
Global Emerging Markets unit
On Friday 28 December 2007 the Coronation Global Emerging Markets Flexible Fund
was successfully launched to the retail market. This was followed by the launch
of a hedge fund, the Coronation Global Emerging Markets Opportunities Fund, on 4
February 2008.
Interim cash dividend
We continue in our objective of rewarding shareholders through regular and
significant distributions of free cash flow generated. The basis on which the
current interim cash dividend is calculated mirrors that of the previous interim
distribution. We make distributions 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. We
have also added back the R15.1 million dividend tax paid during the period
(which relates to earnings generated in the previous financial year). This would
amount to a dividend distribution of 24.0 cents per share, but at this interim
stage and consistent with the previous comparable period, we have decided to
only distribute two thirds of that, which translates to 16.0 cents per share.
In compliance with the Listings Requirements of the JSE Limited, the following
dates are applicable:
Last date to trade Friday, 30 May 2008
Shares trade ex dividend Monday, 2 June 2008
Record date Friday, 6 June 2008
Payment date Monday, 9 June 2008
Share certificates may not be dematerialised or rematerialised between Monday, 2
June 2008, and Friday, 6 June 2008, both dates inclusive.
Prospects
The outlook for the financial markets suggests that market volatility will
continue for the foreseeable future. Although this undoubtedly will have an
impact on profitability of the Company over the next six months, we are
confident that we have in place the right strategy, business model and
investment philosophy focused on delivering long-term investment returns for our
clients. The business has a diversified revenue stream and a strong cash flow
and continues to be 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.
Gavan Ryan Hugo Nelson John Snalam
Chairman Chief executive officer Company secretary
Cape Town
13 May 2008
Directors: G M C Ryan* (Chairman), H A Nelson (Chief Executive Officer)
M M du Toit, W T Floquet*+, S Pather*+, A Watson*+ (* 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 (Pty) Limited, 70
Marshall Street, Johannesburg 2001
Website: www.coronation.com
Condensed consolidated income statement
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
2008 2007 % 2007
R`000 R`000 Change R`000
Fund management activities
Revenue 421 104 422 524 961 996
Financial income 11 804 27 860 (58) 45 914
Interest and dividend income 8 195 12 712 24 452
Other income 3 609 15 148 21 462
Operating expenses (269 058) (257 202) 5 (564 489)
Share-based payment expense (13 354) (17 089) (40 212)
Other expenses (255 704) (240 113) (524 277)
Interest expense (7 863) (6 729) (13 049)
Share of profit of associate 919 1 334
Profit from fund management 155 987 187 372 (17) 431 706
Income attributable to (749) 35 850 49 149
policyholder linked assets
and investment partnerships
Net fair value gains on 4 449 45 501 54 956
policyholder and investment
partnership financial
instruments
Administration expenses borne (5 198) (9 651) (5 807)
by policyholders and
investors in investment
partnerships
Profit before tax 155 238 223 222 (480 855)
Income tax expense (64 970) (96 052) (196 249)
Taxation on shareholder (65 719) (60 202) (147 100)
profits
Taxation on policyholder 749 (35 850) (49 149)
investment contracts
Profit for the period 90 268 127 170 (29) 284 606
Attributable to:
- equity holders of the 88 181 127 009 (31) 284 035
Company
- minority interest 2 087 161 571
Profit for the period 90 268 127 170 284 606
Earnings per share (cents)
- basic 27.4 36.0 (24) 81.4
- diluted 24.7 32.2 (23) 74.3
Note to the income statement
Headline earnings per share
(cents)
- basic 26.6 34.7 (23) 79.6
- diluted 24.0 31.1 (23) 72.7
Distribution per share
(cents)
- dividend distribution 16.0 47.0
- capital distribution 20.0
Condensed consolidated balance sheet
Reviewed Reviewed Audited
31 March 31 March 30 Sept
2008 2007 2007
R`000 R`000 R`000
Assets
Intangible assets 1 097 309 1 092 869 1 097 309
Equipment 11 895 7 031 9 171
Investment in associate 1 960 1 960
Deferred tax asset 3 854 3 188 1 872
Investments backing policyholder
funds and investments held
through investment partnerships 19 805 338 17 542 785 18 482 686
Financial assets available-for-sale 41 865 73 485 66 804
Financial assets at fair value 14 966 74 767 31 154
through profit or loss
Trade and other receivables 108 607 119 084 168 265
Cash and cash equivalents 120 423 236 211 119 134
Total assets 21 206 217 19 149 420 19 978 355
Liabilities
Interest-bearing borrowing 115 777 132 625 125 765
Deferred tax liabilities 28 509 64 235 47 788
Policyholder investment contract 19 777 104 17 481 183 18 437 426
liabilities and liabilities to
holders of interests in investment
partnerships
Income tax payable 86 979 72 235 108 702
Trade and other payables 215 927 191 651 245 914
Total liabilities 20 224 296 17 941 929 18 965 595
Net assets 981 921 1 207 491 1 012 760
Total equity attributable to equity 975 436 1 201 405 1 008 362
holders of the Company
Minority interest 6 485 6 086 4 398
Total equity 981 921 1 207 491 1 012 760
Condensed consolidated statement of changes in equity
R`000 Share capital Foreign Accumulated Share-based
and premium currency earnings payment
translation reserve
reserve
Balance at 843 153 11 197 316 892 72 991
30 September 2006
Currency translation (6 655)
differences
Revaluation of
financial assets
available-for-sale
- Revaluation gains
taken to equity
- Transferred to
profit or loss on
disposal
Net income recognised (6 655)
directly in equity
Profit for the period 127 009
Total recognised (6 655) 127 009
income 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 (13 071)
and cancelled
Balance at 657 112 4 542 443 040 90 080
31 March 2007
Currency translation (351)
differences
Revaluation of
financial assets
available-for-sale
- Revaluation gains
taken to equity
- Transferred to
profit or loss on
disposal
Net income recognised (351)
directly in equity
Profit for the period 157 026
Total recognised (351) 157 026
income and expense
for the period
Share-based payment 23 123
reserve
Capital distribution (71 238)
Shares repurchased (296 848)
and cancelled
Minority interest
Balance at 289 026 4 191 600 066 113 203
30 September 2007
Currency translation 13 502
differences
Revaluation of
financial assets
available-for-sale
- Revaluation gains
taken to equity
- Transferred to
profit or loss on
disposal
Net income recognised 13 502
directly in equity
Profit for the period 88 181
Total recognised 13 502 88 181
income and expense
for the period
Share-based payment 13 354
reserve
Dividends paid (156 473)
Shares issued 9 031
Balance at 298 057 17 693 531 774 126 557
31 March 2008
Condensed consolidated statement of changes in equity (continued)
R`000 Revaluation Issued Minority Total equity
reserve capital and interest
reserves
attributable
to equity
holders of
the Company
Balance at 5 803 1 250 036 1 250 036
30 September 2006
Currency translation (6 655) (6 655)
differences
Revaluation of 828 828 828
financial assets
available-for-sale
- Revaluation gains 5 276 5 276 5 276
taken to equity
- Transferred to (4 448) (4 448) (4 448)
profit or loss on
disposal
Net income recognised 828 (5 827) (5 827)
directly in equity
Profit for the period 127 009 161 127 170
Total recognised 828 121 182 161 121 343
income 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 (13 071) (13 071)
and cancelled
Balance at 6 631 1 201 405 6 086 1 207 491
31 March 2007
Currency translation (351) (351)
differences
Revaluation of (4 755) (4 755) (4 755)
financial assets
available-for-sale
- Revaluation gains (2 305) (2 305) (2 305)
taken to equity
- Transferred to (2 450) (2 450) (2 450)
profit or loss on
disposal
Net income recognised (4 755) (5 106) (5 106)
directly in equity
Profit for the period 157 026 410 157 436
Total recognised (4 755) 151 920 410 152 330
income and expense
for the period
Share-based payment 23 123 23 123
reserve
Capital distribution (71 238) (71 238)
Shares repurchased (296 848) (296 848)
and cancelled
Minority interest (2 098) (2 098)
Balance at 1 876 1 008 362 4 398 1 012 760
30 September 2007
Currency translation 13 502 13 502
differences
Revaluation of (521) (521) (521)
financial assets
available-for-sale
- Revaluation gains 1 862 1 862 1 862
taken to equity
- Transferred to (2 383) (2 383) (2 383)
profit or loss on
disposal
Net income recognised (521) 12 981 12 981
directly in equity
Profit for the period 88 181 2 087 90 268
Total recognised (521) 101 162 2 087 103 249
income and expense
for the period
Share-based payment 13 354 13 354
reserve
Dividends paid (156 473) (156 473)
Shares issued 9 031 9 031
Balance at 1 355 975 436 6 485 981 921
31 March 2008
Condensed consolidated segment report
Six months Six months Full year
reviewed reviewed audited
31 March 31 March 30 Sept
R`000 2008 2007 2007
Africa
Segment revenue 368 963 379 788 880 241
Segment results 137 130 154 297 384 323
International
Segment revenue 52 141 42 736 81 755
Segment results 14 916 11 025 13 184
Group
Segment revenue 421 104 422 524 961 996
Segment results 152 046 165 322 397 507
Condensed consolidated statement of cash flows
Six months Six months Full year
reviewed reviewed audited
31 March 2008 31 March 2007 30 Sept
2007
R`000 R`000 R`000
Profit for the period 90 268 127 170 284 606
Income tax expense 64 970 96 052 196 249
Non-cash and other adjustments 13 870 (23 463) 9 678
Operating profit before changes in 169 108 199 759 490 533
working capital
Working capital changes 29 671 38 839 35 540
Cash generated from operations 198 779 238 598 526 073
Interest paid (8 039) (6 712) (13 167)
Income taxes paid (90 928) (75 359) (158 448)
Net cash from operating activities 99 812 156 527 354 458
Net cash from investing activities 45 405 26 559 86 848
Net cash used in financing (157 430) (193 810) (568 756)
activities
- distributions to shareholders (156 473) (186 137) (257 375)
- other (957) (7 673) (311 381)
Net decrease in cash and cash (12 213) (10 724) (127 450)
equivalents
Cash and cash equivalents at 119 134 253 590 253 590
beginning of period
Exchange rate adjustments 13 502 (6 655) (7 006)
Cash and cash equivalents at end of 120 423 236 211 119 134
period
Earnings per share
Six months Six months Full year
reviewed reviewed audited
31 March 2008 31 March 2007 30 Sept
2007
Weighted average number of ordinary 321 597 285 353 181 887 348 893 885
shares in issue during the period
Weighted average number of ordinary 356 936 439 393 841 193 386 441 246
shares potentially in issue
R`000 R`000 R`000
Earnings attributable to 90 268 127 170 284 606
shareholders
Minority interest (2 087) (161) (571)
Dividend on convertible cumulative (149)
redeemable preference shares
Earnings attributable to ordinary 88 181 127 009 283 886
shareholders
Profit on disposal of financial (2 459) (4 448) (6 024)
assets available-for-sale
(Profit)/loss on disposal of (103) 56
equipment
Profit on disposal of investment in (48)
subsidiary
Headline earnings attributable to 85 619 122 561 277 870
ordinary shareholders
Actual number of shares in issue at 323 369 480 355 440 728 320 732 799
the end of the period
Notes to the condensed consolidated financial statements
1. Basis of preparation and accounting policies
The financial information has been prepared in accordance with the recognition
and measurement principles of International Financial Reporting Standards
(IFRS), the disclosure and presentation requirements of IAS 34 Interim Financial
Reporting, the requirements of the South African Companies Act, Act 61 of 1973,
as amended, and the Listings Requirements of the JSE Limited. The condensed
consolidated financial statements do not include all of the information required
for full annual financial statements.
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 2007.
These condensed consolidated interim financial statements have been prepared in
accordance with the historical 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.
13 May 2007
Cape Town
Sponsor to Coronation:
Deutsche Securities (SA) (Proprietary) Limited
Date: 13/05/2008 07:30:04 Produced by the JSE SENS Department.
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