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CML
CML
CML - Coronation - Reviewed Preliminary Financial Results For The Year Ended 30
September 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 preliminary financial results for the year ended 30 September 2008
Assets under management of R125 billion (-7%)
Cash of R186 million returned to shareholders
Diluted headline earnings per share of 48.6 cents (-33%)
Distribution of 46 cents per share (-31%)
Hugo Nelson, CEO commented: "As expected and indicated in January, all areas of
our business have been impacted by recent market events.
The operational heart of our business however remains sound and we`ve maintained
our distribution policy. We held firm to our investment philosophy of investing
for the long term, delivering strong relative performance in both our
institutional and unit trust portfolios.
We will retain our singular focus on identifying value in order to deliver sound
long-term returns for our clients. This will ultimately bring rewards to all
stakeholders."
Enquiries:
Coronation Fund Managers 021 680 2000
Hugo Nelson, CEO
John Snalam, CFO
Anton Pillay, COO
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Results
This year`s results reflect a period of extreme volatility across world markets
and a local economy that has been buffeted by a series of economic shocks.
Markets remain challenging and the current financial crisis is undoubtedly one
of the most extreme of modern times. Against this economic backdrop all business
areas have come under pressure.
Despite difficult operating conditions, assets under management declined by only
6.7% from R134 billion at 30 September 2007 to R125 billion at 30 September
2008. The profit for the year is down 38% to R178 million (2007: R285 million).
Headline earnings per share decreased by 34% to 52.9 cents (2007: 79.6 cents)
and diluted headline earnings per share declined by 33% to 48.6 cents (2007:
72.7 cents).
Capital structure
During 2008 Coronation initiated a further share buy-back programme which
resulted in a total of 8 211 988 shares being bought back at a cost of R39.6
million. These shares were all cancelled. Together with additional shares issued
during the year in terms of the exercise of 3 253 352 options granted to staff
in December 2003, this resulted in a weighted average number of shares in issue
for the financial year of 321 080 742 (2007: 348 893 885). Actual shares in
issue at 30 September 2008 were 315 774 163 (2007: 320 732 799).
Cash returned to shareholders
While this is the first year since listing in 2003 that Coronation is reporting
a decline in earnings, we continue to reward shareholders with generous
distributions. The distribution policy has been maintained. The final cash
dividend for the 2008 financial year will be R95 million, equivalent to a cash
dividend per share of 30 cents, making a total distribution of 46 cents per
share for the 2008 financial year (2007: 67 cents per share). Inclusive of the
amounts spent on share buy-backs, Coronation will be returning R186 million
(share buy-back R40 million and cash distributions of R146 million) in 2008. In
2007 R522 million was returned (share buy-back R300 million and cash
distributions of R222 million).
In compliance with the requirements of the JSE Limited, the following dates are
applicable:
Last day to trade cum dividend Friday, 5 December 2008
Shares trade ex dividend Monday, 8 December 2008
Record date Friday, 12 December 2008
Payment date Monday, 15 December 2008
Share certificates may not be dematerialised or rematerialised between Monday, 8
December 2008, and Friday, 12 December 2008, both dates inclusive.
Investment performance
The domestic equity market held up well into the initial global sell-off. A
combination of the `blow-off` phase of the commodity bull market and a weaker
rand saw the large resource component of the JSE deliver strong returns in the
first half of the year. In the final quarter, all of this changed as world stock
markets collapsed and the commodity bubble burst. Amidst the market turmoil we
held firm to our investment philosophy of investing for the long term,
delivering strong relative performance in both our institutional and unit trust
portfolios.
Institutional
The institutional business continued to strengthen its position as a leader in
the industry, ending the year with a net inflow of R775 million at a time when
the FTSE/JSE All Share Index declined by 20%.
We were successful in attracting a number of new client mandates, particularly
in the area of specialist fixed income where we are recognised for our product
innovation. Our equity franchise continues to attract assets, with the Core
Equity portfolio outperforming its benchmark by 5.82% for the year ended
September 2008. The domestic and global balanced houseview portfolios also
outperformed their benchmarks for the year by 2.64% and 2.38% respectively.
Retail
Domestic unit trusts experienced net outflows of R4.35 billion over the period.
This is in sympathy with the industry trend for single manager funds as
investors sought the relative safety of the money market over alpha seeking
solutions in a falling equity market. The decline in assets also reflects the
difficult performance year experienced by the Strategic Income Fund and the
Absolute franchise. On a positive note, all core funds ranked in the top two
positions of their respective categories on an annualised basis since inception
to end September 2008, and all significantly outperformed their benchmarks.
Coronation`s skill as a stock picking house is best illustrated in the
Coronation Top 20 Fund`s no. 1 position over all time periods of 1, 3 and 5
years, and in our one-year top decile peer group ranking for the Coronation
Equity Fund. Also ranked in the top decile of its peer grouping for the year is
the Balanced Plus Fund, which is 1st over 3 and 5 years, and for those investors
seeking less exposure to the equity markets the Coronation Balanced Defensive
Fund delivered on its promise, ending the year in no. 2 position of all
prudential low equity funds. Within the absolute franchise, the Coronation
Capital Plus Fund is no. 1 over 5 years.
International
Traditionally known as a global fund of funds manager (long only and hedge
funds) we enhanced our global product offering to include single manager funds,
managed by our Global Emerging Markets (GEM) and Africa teams based in Cape
Town. We also launched the Coronation Latitude fund, a flexible portfolio which
invests across asset classes in both global developed and emerging markets.
Assets under management total US$1.26 billion.
Initiatives
The GEM unit is now fully operational. We have also established an Africa unit
with the introduction of the Coronation Africa and Africa Frontiers funds.
We successfully recruited a highly experienced private equity team and in
launching our first fund have partnered with Peotona, a leading empowerment
entity which is 85% owned by black women. The first closing of the Coronation
Peotona Private Equity Fund is scheduled for early 2009.
PPS Investments, a joint initiative in which we own 49%, continues to grow and
develop.
Prospects
The financial crisis is exacerbating an already serious cyclical downturn in
international economies. Despite aggressive and unprecedented intervention by
governments and central banks worldwide, the outlook for the global economy is
deteriorating rapidly. It is clear that the developing recession is likely to be
the worst in modern times. Stock markets have already reacted sharply with the
MSCI world index down 43% (US dollar terms) to 31 October 2008 from its peak a
year ago. Price/earnings ratios have fallen to historically low levels but only
time will tell whether all the bad news has been discounted.
Although largely shielded from the financial crisis, South Africa will not
escape the impact of the looming world recession. Local markets have already
declined sharply and the immediate future direction remains unclear.
In these challenging times we will retain our singular focus on identifying
value in order to deliver sound long-term returns for our clients. This will
ultimately bring its rewards in terms of a recovery in our earnings.
Financial statements
The financial information has been reviewed by the company`s auditors, KPMG Inc.
A copy of their 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
11 November 2008
Directors:
G M C Ryan* (Chairman), H Nelson (Chief Executive Officer), M M du Toit*, J
February*+, W T Floquet*+, S Pather*+, A Watson*+(* Non-executive +
Independent)
Registered office:
7th Floor, MontClare Place, Cnr Campground & Main Roads,
Claremont 7708
Postal address: PO Box 993, Cape Town 8000
Transfer secretaries:
Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg 2001
Website: www.coronation.com
Condensed consolidated income statement
Reviewed Audited
2008 Growth 2007
R`000 % R`000
Fund management activities
Revenue 803 632 (16) 961 996
Financial income 14 568 (68) 45 914
Interest and dividend income 11 431 24 452
Other income 3 137 21 462
Operating expenses (525 087) (7) (564 489)
Share-based payment expense (33 661) (40 212)
Other expenses (491 426) (524 277)
Interest expense (16 441) (13 049)
Share of profit of associate - 1 334
Profit from fund management 276 672 (36) 431 706
(Expense)/income attributable to (5 650) 49 149
policyholder linked assets and
investment partnerships
Net fair value gains on policyholder 1 679 54 956
and investment partnership financial
instruments
Administration expenses borne by (7 329) (5 807)
policyholders and investors in
investment partnerships
Profit before tax 271 022 480 855
Income tax expense (93 434) (196 249)
Taxation on shareholder profits (99 084) (33) (147 100)
Taxation on policyholder investment 5 650 (49 149)
contracts
Profit for the year 177 588 (38) 284 606
Attributable to:
- equity holders of the company 172 943 284 035
- minority interest 4 645 571
Profit for the year 177 588 284 606
Earnings per share (cents)
- basic 53.9 (34) 81.4
- diluted 49.5 (33) 74.3
Note to the income statement
Headline earnings per share (cents)
- basic 52.9 (34) 79.6
- diluted 48.6 (33) 72.7
Capital distribution per share (cents)
- interim - 20.0
Dividend distribution per share
(cents)
- interim 16.0 -
- final payable 30.0 47.0
Total distribution 46.0 (31) 67.0
Shares in issue (millions) 315.8 320.7
Weighted average number of ordinary 321.1 348.9
shares (millions)
Weighted average number of ordinary 354.9 386.4
shares (diluted) (millions)
Diluted number of shares (thousands)
Reviewed Audited
2008 2007
Weighted average number of shares in issue 321 081 348 894
Shares to be issued
- Preference share transaction converted on 24 - 1 145
November 2006
- December 2003 options 191 2 002
- BEE transaction 33 625 34 400
Diluted weighted average number of shares in 354 897 386 441
issue
Condensed consolidated statement of changes in equity
R`000 Share Foreign Accumulated Share-based
capital and currency earnings payment
share translation reserve
premium reserve
Balance at 30 843 153 11 197 316 892 72 991
September 2006
Currency
translation
differences (7 006)
Revaluation of
available-for-sale
financial assets
- Revaluation gains
taken to equity
- Transferred to
profit or loss on
sale
Net income (7 006)
recognised directly
in equity
Profit for the year 284 035
Total recognised (7 006) 284 035
income and expense
for the year
Share-based payment 40 212
reserve
Dividends paid (861)
Capital (256 514)
distribution
Shares issued 1 963
Shares repurchased (299 576)
and cancelled
Minority interest
at acquisition of
subsidiary
Balance at 30 289 026 4 191 600 066 113 203
September 2007
Currency 13 349
translation
differences
Revaluation of
available-for-sale
financial assets
- Revaluation
losses taken to
equity
- Transferred to
profit or loss on
sale
Net income 13 349
recognised directly
in equity
Profit for the year 172 943
Total recognised 13 349 172 943
income and expense
for the year
Share-based payment 33 661
reserve
Dividends paid (203 861)
Shares issued 11 143
Shares repurchased
and cancelled (39 575)
Balance at 30 260 594 17 540 569 148 146 864
September 2008
Condensed consolidated statement of changes in equity (continued)
R`000 Revaluation Issued Minority Total
reserve capital and interest equity
reserves
attributable
to equity
holders of
the company
Balance at 30 5 803 1 250 036 1 250 036
September 2006
Currency (7 006) (7 006)
translation
differences
Revaluation of (3 927) (3 927) (3 927)
available-for-sale
financial assets
- Revaluation gains 2 971 2 971 2 971
taken to equity
- Transferred to (6 898) (6 898) (6 898)
profit or loss on
sale
Net income (3 927) (10 933) (10 933)
recognised directly
in equity
Profit for the year 284 035 571 284 606
Total recognised (3 927) 273 102 571 273 673
income and expense
for the year
Share-based payment
reserve 40 212 40 212
Dividends paid (861) (861)
Capital (256 514) (256 514)
distribution
Shares issued 1 963 1 963
Shares repurchased (299 576) (299 576)
and cancelled
Minority interest 3 827 3 827
at acquisition of
subsidiary
Balance at 30 1 876 1 008 362 4 398 1 012 760
September 2007
Currency 13 349 13 349
translation
differences
Revaluation of (6 170) (6 170) (6 170)
available-for-sale
financial assets
- Revaluation (2 531) (2 531) (2 531)
losses taken to
equity
- Transferred to (3 639) (3 639) (3 639)
profit or loss on
sale
Net income (6 170) 7 179 7 179
recognised directly
in equity
Profit for the year 172 943 4 645 177 588
Total recognised (6 170) 180 122 4 645 184 767
income and expense
for the year
Share-based payment 33 661 33 661
reserve
Dividends paid (203 861) (4 348) (208 209)
Shares issued 11 143 11 143
Shares repurchased (39 575) (39 575)
and cancelled
Balance at 30 (4 294) 989 852 4 695 994 547
September 2008
Condensed consolidated balance sheet
Reviewed Audited
2008 2007
R`000 R`000
Assets
Intangible assets 1 097 309 1 097 309
Equipment 20 684 9 171
Investment in associate 1 960 1 960
Deferred tax asset 4 999 1 872
Investments backing policyholder funds and 19 207 633 18 482 686
investments held through investment
partnerships
Investment securities 36 312 97 958
Loan receivable 39 137 -
Trade and other receivables 111 496 168 265
Cash and cash equivalents 108 453 119 134
Total assets 20 627 983 19 978 355
Liabilities
Interest-bearing borrowing 110 419 125 765
Deferred tax liabilities 12 520 47 788
Policyholder investment contract liabilities 19 195 113 18 437 426
and liabilities to holders of interests in
investment partnerships
Income tax payable 26 083 108 702
Trade and other payables 170 757 245 914
Bank overdraft 118 544 -
Total liabilities 19 633 436 18 965 595
Net assets 994 547 1 012 760
Equity
Issued capital and reserves attributable to 989 852 1 008 362
equity holders of the company
Minority interest 4 695 4 398
Total equity 994 547 1 012 760
Condensed consolidated statement of cash flows
Reviewed Audited
2008 2007
R`000 R`000
Cash flows from operating activities
Profit before tax 271 022 480 855
Non-cash and other adjustments 74 867 9 678
Working capital changes (18 125) 35 540
Cash generated from operations 327 764 526 073
Interest paid (16 704) (13 167)
Income taxes paid (214 448) (158 448)
Net cash from operating activities 96 612 354 458
Net cash from investing activities 12 801 86 848
Cash flows from financing activities
Shares issued, repurchased and cancelled (28 432) (297 613)
Capital distribution and dividends paid (208 209) (257 375)
Decrease in interest bearing borrowings (15 346) (13 768)
Net cash used in financing activities (251 987) (568 756)
Net decrease in cash and cash equivalents (142 574) (127 450)
Cash and cash equivalents at beginning of 119 134 253 590
year
Exchange rate adjustments 13 349 (7 006)
Cash and cash equivalents at end of year (10 091) 119 134
Reconciliation of headline earnings
Reviewed Audited
2008 2007
R`000 R`000
Earnings attributable to shareholders 172 943 284 035
Dividend on convertible cumulative
redeemable preference shares - (149)
Earnings attributable to ordinary 172 943 283 886
shareholders
Effect of adjustments: (3 798) (6 868)
(Profit)/loss on disposal of equipment (159) 86
Profit on disposal of available-for-sale (3 639) (6 898)
financial assets
Profit on disposal of investment in - (56)
subsidiary
Total tax effect of adjustments 637 852
Headline earnings 169 782 277 870
Segment report
Africa
Reviewed Audited
2008 2007
R`000 R`000
Segment revenue 724 825 880 241
Segment operating expenses (452 893) (495 918)
Segment result for the year 271 932 384 323
Net financial (expense)/income (956) 22 606
Share of profit of associate - 1 334
Profit from fund management 270 976 408 263
Segment report (continued)
International
Reviewed Audited
2008 2007
R`000 R`000
Segment revenue 78 807 81 755
Segment operating expenses (72 194) (68 571)
Segment result for the year 6 613 13 184
Net financial (expense)/income (917) 10 259
Share of profit of associate - -
Profit from fund management 5 696 23 443
Segment report (continued)
Group
Reviewed Audited
2008 2007
R`000 R`000
Segment revenue 803 632 961 996
Segment operating expenses (525 087) (564 489)
Segment result for the year 278 545 397 507
Net financial (expense)/income (1 873) 32 865
Share of profit of associate - 1 334
Profit from fund management 276 672 431 706
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 (JSE).
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 financial statements are consistent with
those applied for the year ended 30 September 2007.
These condensed consolidated 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 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.
Cape Town
11 November 2008
Sponsor to Coronation:
Deutsche Securities (SA) (Proprietary) Limited
Date: 11/11/2008 07:05:01 Produced by the JSE SENS Department.
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