| Mon 13 May 2002, 0:00 | | Coronation Holdings Limited - Interim Results For |
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Coronation Holdings Limited - Interim results for the six months ended 31
March 2002
* Headline earnings of 264 cents per share
* 23% increase in net asset value per share
Group results
Coronation recorded headline earnings of R244 million for the six months
ended 31 March 2002, a reduction of 21% over the same period last year.
The extreme uncertainty experienced in global financial markets combined
with increasing investor scepticism during the period under review,
impacted negatively on local and international trading conditions. The
Group did not escape this and in addition, experienced an increase in its
cost ratios due to the consolidation of African Harvest and the relatively
higher cost of doing business offshore. The unprofitability of start up
businesses and investments in information technology systems also added to
costs.
Over the past number of years, the Group has actively developed its
offshore businesses, and translation reserves of R416 million generated in
the current period significantly increased net asset value, but were not
reflected in earnings.
Coronation Fund Managers
Coronation Fund Managers (CFM) had a very pleasing six months and produced
attributable earnings of R99 million, a 65% increase over the same period
last year. The business experienced positive inflows of both institutional
and retail funds and this, together with the increases in the market
values of CFM`s portfolios, meant that assets under management at 31 March
2002 exceeded R56 billion and international assets under management at
that date exceeded US$1,2 billion.
CFM was able to increase its market share in a difficult environment by
focusing on superior and consistent performance, innovative products and
exceptional client service.
Business highlights
* Strong investment performance: CFM`s segregated institutional portfolios
were ranked 3rd over one- and three-year periods, and 2nd over a five-
year period to 31 March 2002, in the Alexander Forbes Global Large Manager
Watch Survey.
* The Coronation Peak Fund, the Coronation Global Equity Fund and the
Coronation International Active Fund of Funds all comfortably outperformed
their international benchmarks.
* Our unit trust company, Coronation Management Company, was placed 1st
over one- and three-years and 2nd overall in the highly regarded Plexus
Survey.
* The launch of a new asset management company, Kagiso Asset Management
(KAM), via a joint venture with Kagiso Trust Investments in March 2002.
KAM focuses on a quantitative investment management style, which will
complement CFM`s core competency of active asset management.
CFM produced very strong results in the second half of the 2001 financial
year, largely as a result of substantial performance fees. While
management is hopeful of maintaining the level of earnings reported for
the current six months in the second half of the year, it is unlikely,
given current market conditions, that performance fees of a similar
magnitude will be replicated in the current year.
Coronation Capital
The investment banking industry experienced difficult conditions and sharp
declines in income over the past year. Coronation Capital was no exception
to this. In a demanding environment, attributable earnings for the period
under review amounted to R54 million, a decrease of 71% over the same
period last year. Despite the reduced earnings for the period, net asset
value increased by 15%. Coronation Capital ended the period with
shareholders` funds of more than R1,1 billion, of which 48,3% is
denominated in international currencies.
Difficult conditions were experienced in both the local and international
structured finance areas. Warwick Energy saw several operational setbacks
resulting in a net loss of 1,3 million for the period. Steps have been
taken to reduce the loss over the next six months.
Business highlights
* The investment banking, derivative structuring, interest rate trading,
integrated treasury solutions and property divisions continued to make
positive contributions to earnings.
* The establishment of an international property division is progressing
satisfactorily with the formation of a property management company and the
acquisition of a stake in several high profile income producing retail and
commercial properties in the UK.
* The international product structuring and hedge fund business is gaining
momentum with the establishment of a number of offshore funds.
* Coronation Aircraft Leasing successfully concluded a transaction with GE
Capital`s aircraft leasing subsidiary, thereby securing a substantial
portion of the finance for a series of aircraft on order by a client.
As is evident from these results, Coronation Capital operates in a very
volatile environment. Despite the difficulty of forecasting in this
environment, management is of the view that the results for the second six
months will show an improvement over those for the period under review. It
is likely, however, that the results for the year will be substantially
below those for the previous financial year.
African Harvest
African Harvest became a subsidiary with effect from 1 February 2002 as a
result of a renegotiation of the shareholders` agreement with NE Corp.
Ltd, and was consolidated from this date.
African Harvest reported a headline loss of R2 million and an attributable
loss of R54 million for the period under review. These results included
write-offs of R81 million made on regional, strategic and private equity
investments.
Although the results for the period were less than satisfactory, the
underlying fund management and investment banking businesses continued to
perform well. The benefits of the focus on these businesses and the cost
cutting exercises undertaken by management should start to be realised
during the second half of the financial year.
Investments
The contribution to Group income from investments was R121 million, a
substantial increase over the contribution of R38 million for the same
period last year. Interest and dividends on investments showed pleasing
increases, currency gains of R48 million were recorded on monetary assets
held offshore and a realisation of R40 million arose on the proceeds of
the decapitalisation by a subsidiary.
A substantial portion of the Group`s investments comprises monetary assets
held offshore. The rand value of and return on these assets is heavily
dependent on the relative strengths of the rand and various international
currencies. While an element of investment earnings will be influenced by
rates in the local market, a large portion of the earnings for the second
half of the year will depend upon currency movements.
Accounting policies
The interim financial statements are prepared in accordance with South
African statements of Generally Accepted Accounting Practice. The
accounting policies applied in the interim financial statements are
consistent with those applied in the annual financial statements for the
year ended 30 September 2001.
Directorate
In March 2002, Leon Campher resigned from the Board. The Board expresses
its gratitude for his contribution over the years.
Looking Forward
Given the recent difficult markets, the Group has placed considerable
focus on preserving its capital and pursuing its strategy of international
diversification. The results of this are evident in the strong growth
achieved in net asset value.
The outlook for financial markets remains uncertain and volatile. These
conditions limit certain of the opportunities available to market
participants and increase the risks related to those that exist. The Group
has adapted its trading strategies to take advantage of these conditions
but recognises that returns in this environment will be limited.
Our focus looking forward will be to continue building our international
businesses organically. We have committed considerable resources to this
process, have had some success and believe that within the next 12 to 18
months the non-performing start up operations will generate more
satisfactory returns. In addition, we will continue to review other
opportunities to apply the Group`s significant cash holding and will take
advantage of these where justified by the available returns.
In the context of the difficult market conditions over the last six
months, the Group has performed well. We have a strong balance sheet and a
team of very talented and committed people and these will stand us in good
stead for the future.
For and on behalf of the Board
CB Brayshaw DL Barnes P Vogel
Chairman Chief Executive Officer Company Secretary
Group income statement
Unaudited Unaudited Audited
6 months ended % 6 months ended 12 months ended
R million 31 Mar 2002 change 31 Mar 2001 30 Sept 2001
Operating income 508 13 452 944
Fee income 281 173 496
Trading income 130 189 237
Investment income 29 26 52
Other income 68 64 159
Operating expenses 281 57 180 383
Net interest income 70 79 147
Interest received 109 103 198
Interest paid (39) (24) (51)
Net operating income 297 351 708
Net capital gains (3) - (21)
Net income before taxation 294 351 687
Taxation 74 39 79
Net income after taxation 220 (29) 312 608
Share of associates` income 4 25 -
Net income 224 337 608
Outside shareholders`
interest (23) 28 57
Net income attributable
to shareholders 247 (20) 309 551
Headline earnings
adjustments (3) - 21
Impairment of investments,
goodwill and capital
assets 37 - 32
Realisation on
decapitalisation of
subsidiary (40) - -
Surplus on sale of
associates - - (11)
Headline earnings 244 (21) 309 572
Shares in issue net of
treasury stock (millions)
Ordinary shares 30 30 30
`N` ordinary shares 62 64 63
Total number of shares 92 94 93
Weighted average number
of shares (millions) 92 94 94
Earnings per share (cents)
Attributable 267 (19) 328 608
Headline 264 (20) 328 586
Group cash flow statement
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
R million 31 Mar 2002 31 Mar 2001 30 Sept 2001
Net income before taxation 294 351 687
Adjustments for non-cash items 62 107 1
Operating income 356 458 688
Net funding of operating assets,
taxation and dividend (398) (848) (435)
Net cash (outflow)/inflow from
operating activities (42) (390) 253
Net cash inflow/(outflow) from
investing activities 77 67 (457)
Net cash inflow from
financing activities 44 97 122
Net increase/(decrease) in cash
and cash equivalents 79 (226) (82)
Net cash and cash equivalents
at beginning of period 2 130 1 928 1 928
Exchange rate adjustments 416 103 284
Net cash and cash equivalents
at end of period 2 625 1 805 2 130
Group Balance sheet
Unaudited Unaudited Audited
6 months ended % 6 months ended 12 months ended
R million 31 Mar 2002 change 31 Mar 2001 30 Sept 2001
ASSETS
Non-current assets
Property, plant and
equipment 206 14 118
Intangible assets 8 - 10
Investment in associates 165 523 470
Investments and long-term
receivables 1 897 1 152 1 682
Deferred taxation 32 4 12
2 308 1 693 2 292
Current assets
Liquid and trading assets 3 980 2 726 2 078
Other receivables 501 554 537
Cash and cash
equivalents 2 625 1 805 2 130
7 106 5 085 4 745
Total assets 9 414 39 6 778 7 037
EQUITY AND LIABILITIES
Equity
Ordinary shareholders`
funds 5 037 4 191 4 340
Outside shareholders`
interest 389 156 185
5 426 4 347 4 525
Non-current liabilities
Long-term liabilities 471 292 367
Deferred taxation 56 36 39
527 328 406
Current liabilities
Trading liabilities 2 940 1 449 1 535
Other payables 521 654 571
3 461 2 103 2 106
Equity and liabilities 9 414 6 778 7 037
Net asset value per
share (cents) 5 480 23 4 456 4 660
Group statement of changes in equity
Non-
Share distri- Distri-
capital and butable butable
R million premium reserves reserves Total
Balance at 1 October 2000 2 106 53 1 616 3 775
Foreign exchange translation
difference - 117 (14) 103
Net income attributable to
shareholders - - 309 309
Issue of shares to outside
shareholders - 15 (15) -
Issue of share capital 5 - - 5
Balance at 31 March 2001 2 111 185 1 896 4 192
Net movement to 30 September 2001 (50) 164 34 148
Balance at 1 October 2001 2 061 349 1 930 4 340
Foreign exchange translation
difference - 416 - 416
Revaluation of investment in
subsidiary - 34 - 34
Net income attributable to
shareholders - - 247 247
Issue of shares to outside
shareholders - 4 (4) -
Balance at 31 March 2002 2 061 803 2 173 5 037
Segment contribution for the six months ended 31 March 2002
2002 2001
Local Inter- Total Local Inter- Total
national national
R million % % % % % %
Coronation Fund
Managers 65 26 34 14 99 40 58 19 2 1 60 20
Coronation Capital 53 22 1 0 54 22 129 42 62 20 191 62
African Harvest (27) (11) - - (27) (11) 20 6 - - 20 6
Investments 75 30 46 19 121 49 8 3 30 9 38 12
Total 166 67 81 33 247 100 215 70 94 30 309 100
The following exchange rates were used at 31 March 2002: US$1 = R11,3250;
1 = R9,8612; 1 = R16,1352.
Directors: C B Brayshaw Chairman, D L Barnes Chief Executive Officer,
G R Tipper Chief Operating Officer, M T Rutherford, G M C Ryan, A Watson
Registered office: Ground Floor, The Bridle, 38 Wierda Road West, Wierda
Valley, Sandton 2196
Postal address: PO Box 652643, Benmore 2010
Transfer secretaries: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg 2001
Registration number: 1902/001739/06
JSE share codes: Ordinary shares CRH ISIN number: ZAE000001772
`N` ordinary shares CRN ISIN number: ZAE000010369
Website: www.coronation.co.za
Date: 13/05/2002 03:19:00 PM Produced by the SENS Department
