| Mon 11 Nov 2002, 12:38 | | Coronation Holdings - Reviewed Results For The Yea |
|
Coronation Holdings - Reviewed results for the year ended 30 September 2002
Coronation Holdings
Registration number: 1902/001739/06
JSE share codes: Ordinary shares: CRH ISIN number: ZAE000001772
`N` ordinary shares: CRN ISIN number: ZAE000010369
Reviewed results for the year ended 30 September 2002
- Net asset value per share up 19%
- Headline earnings per share of 583 cents
Results
2002 was characterised by extreme volatility in world financial markets. Major
international corporate failures, uncertainty regarding the US, Japanese and
major European economies and significant doubts with regard to certain emerging
market economies all contributed to a difficult operating environment for
financial services companies. In these market conditions, a stable and solid
financial structure is paramount to long-term sustainable growth and it is
therefore pleasing to report that Coronation`s financial position continues to
strengthen on the back of solid earnings.
The Coronation Group recorded net income attributable to shareholders of R503
million for the year ended 30 September 2002. Headline earnings totalled R526
million and headline earnings per share were 583 cents. This is a reduction in
headline earnings per share of 6% over 2001. Net asset value per share grew from
R49,08 at 30 September 2001 to R58,38 at
30 September 2002, an increase of 19%.
Operating income increased by 24% over the previous year, primarily as a result
of increased fee income from asset management and the derivative structuring and
structured finance businesses. Operating expenses increased by 53%, partly as a
result of the first time consolidation of African Harvest and Finsource which
accounted for R86,2 million or 42,5% of the increase. Excluding these items,
expenses increased by 30,5% over the previous year. This increase was driven by
the high costs of the international operations, information technology costs and
the variable cost element of the increase in income.
Highlights for the year include:
1. Substantial growth in net asset value in difficult market conditions.
2. Continued excellent results from Coronation Fund Managers, confirming the
company`s position as one of South Africa`s leading asset management companies.
3. Resilient domestic results from Coronation Capital.
4. The exercise by the Group of its voting control to approve the sale of the
businesses and certain net assets of its subsidiary, African Harvest, to an
empowerment shareholder. Significant value for all African Harvest shareholders
was realised through this transaction.
5. The implementation of an aggressive share buy-back programme in terms of
which R588 million of Coronation shares were repurchased.
6. A dividend of 240 cents per ordinary and `N` ordinary share. The dividend was
declared on 8 November 2002 and is equal to the per share dividend declared in
2001.
Coronation Fund Managers
Coronation Fund Managers reported a second year of outstanding results with
attributable earnings of R252 million, an increase of 5% over the exceptional
results achieved last year. In a year characterised by significant consolidation
in the South African asset management industry, Coronation Fund Managers (CFM)
continued to build on its strong reputation with both retail and institutional
investors. Assets under management at 30 September 2002 exceeded R57 billion.
22,2% of these assets (US$1,2 billion) are managed internationally.
CFM`s results can be attributed to its superior capability in offering clients
an innovative range of products, the generation of strong investment performance
and the continued strengthening of relationships with clients.
In March 2002 CFM and Kagiso Trust Investments, which has a majority
shareholding in the business, formed Kagiso Asset Management (KAM). KAM is well
positioned as a quantitative asset manager and is expected to attract
substantial inflows. CFM has previously been successful in establishing other
empowerment businesses, including the asset management companies of African
Harvest and Namibian Harvest, both of which are now significant, independent
players in their markets.
Business Highlights
- Consistent investment performance - CFM`s segregated institutional portfolios
were ranked second over three and five year periods to 30 September 2002 in the
Alexander Forbes Global Large Manager Watch survey.
- The unit trust company, Coronation Management Company, is ranked first overall
in the Plexus survey and is the only management company ranked in the top three
positions over all measurement periods - first over one year, second over two
years, and first over three years.
- The Coronation Global Equity Fund, the flagship multi-manager alternative
strategy fund, outperformed its benchmark, the MSCI World Index, by 20,8% in
dollar terms for the year to 30 September 2002.
Coronation Fund Managers will continue to focus on growing its domestic and
international businesses through a combination of performance, service and
product innovation. While constant attention is paid to running the business
leanly, income for the next year will depend heavily on market conditions.
Coronation Capital
The uncertainty in financial markets and the sustained decline in trading
opportunities continued to adversely affect the business environment in which
Coronation Capital operates. Despite these challenging conditions, Coronation
Capital reported solid profitability with attributable earnings for the year of
R127 million.
The local investment banking, derivative structuring, property, structured
finance, integrated treasury solutions and interest rate trading businesses all
contributed to domestic earnings of R194 million. The international structured
finance business was severely impacted by the volatile global business
environment and was largely responsible for the international loss of R67
million.
Business Highlights
- Income generated from trading and arbitrage activities increased by 25% over
the previous year.
- Fee income increased by 105% as a result of increased contributions from local
structured finance, derivative structuring, the integrated treasury solutions
division and Corovest.
- The international property division produced good performance. A new fund, the
Coronation International Real Estate Fund commenced operations in the third
quarter of 2002 and has attracted significant interest. The Sapphire Retail Fund
and Stannifer Corovest Fund Management continue to perform ahead of budget.
Steps are being taken to address the issues faced in the international
structured finance business. Coronation Capital will focus on growing its
domestic business and the other areas of its international operations, and
should continue to deliver satisfactory growth in net asset value and solid
earnings.
African Harvest
African Harvest has provided poor returns over the last 18 months, primarily as
a result of a number of large asset impairment charges. The company found it
increasingly difficult to grow its business without a majority empowerment
shareholder and this further impacted on profitability.
In May 2002, Business Venture Investments no. 674 (BVI), a company representing
the interests of a consortium which included Mzi Khumalo and certain members of
African Harvest management, made an offer for the business and a substantial
portion of the net assets of African Harvest. In September 2002 Coronation voted
in favour of acceptance of BVI`s offer and the sale was approved. This resulted
in an attributable profit to Coronation of R48 million.
BVI is now well positioned as a leading fund management and investment banking
business with strong empowerment credentials at both an ownership and an
employee level. It is encouraging to see a business formed and developed by the
Group over an extended period evolving into a significant independent financial
services entity.
On 30 September 2002 Coronation acquired a further stake in African Harvest
increasing its shareholding to 74,8%.
Investments
The contribution to Group income from investments was R97 million, an increase
over the contribution of R22 million in the previous year. The contribution
included the Group`s attributable share of capital gains arising from the
realisation of value in African Harvest and net currency losses of R23 million.
The currency gains reported at 31 March 2002 declined over the second half of
the year in line with the strengthening of the rand.
During the year Coronation repurchased 1 719 550 ordinary and 8 938 732 `N`
ordinary shares at a total cost of R588 million. The repurchase of shares
combined with the dividend paid in December 2001 and the dividend to be paid in
December 2002, will result in distributions to shareholders of R1 billion over a
13 month period.
Change in accounting policy
During the year the Group changed its accounting policy for dividends to reflect
dividends in the period declared rather than in the year to which they relate,
in line with AC 107. The effect of the change in policy was to increase
shareholders` funds at 1 October 2000 by R141 million, and to reflect the 2000
dividend of R141 million in the 2001 year and the 2001 dividend of R224 million
in the 2002 year. Net income for the 2001 financial year increased by R9
million, representing the STC on the 2001 dividend (2000 dividend: Rnil), which
is now reflected in the 2002 results.
Accounting policies
The financial results are prepared in accordance with South African Statements
of Generally Accepted Accounting Practice. With the exception of the change in
accounting policy referred to above, the accounting policies applied in the
financial results are consistent with those applied in the previous year.
Prospects
The Group has delivered a solid performance in a year marked by unfavourable
economic conditions and weak financial markets. This environment is expected to
prevail for a large part of the next year and may lead to further consolidation
in or exits from a financial services industry rocked by change and uncertainty.
Coronation will continue to focus on generating quality income and achieving
consistent growth in net asset value.
Coronation has differentiated itself through its people. We are encouraged by
the performance our people have achieved and thank everyone for their
contributions. We also extend our thanks to clients and shareholders for their
continued support.
Dividend declaration
A dividend of 240 cents per ordinary and `N` ordinary share (2001: 240 cents)
has been declared. The last date to trade (`cum` the dividend) in order to
participate in the dividend will be Friday, 29 November 2002. The shares of
Coronation Holdings will commence trading (`ex` dividend) on Monday, 2 December
2002 and the record date will be Friday, 6 December 2002. Dividends will be paid
to members on Monday, 9 December 2002.
Share certificates may not be dematerialised or rematerialised between Monday 2
December 2002 and Friday 6 December 2002, both days inclusive.
Review by auditors
The company`s auditors, KPMG Inc., have reviewed the results reflected below.
Their unqualified review opinion is available on request from the Company
Secretary.
C B Brayshaw D L Barnes P H Vogel
Chairman Chief Executive Officer Company Secretary
Cape Town
11 November 2002
Group income statement
for the year ended 30 September
Reviewed Audited
2002 % 2001
R million change R million
Operating income 1 172 24 944
Fee income 701 496
Trading income 276 237
Investment income 64 52
Other income 131 159
Operating expenses (586) 53 (383)
Net interest income 116 147
Interest received 211 198
Interest paid (95) (51)
Net operating income 702 708
Net capital impairments and surpluses (19) (21)
Net income before taxation 683 687
Taxation (162) (70)
Net income after taxation 521 (16) 617
Share of associates` income 2 -
Net income 523 617
Outside shareholders` interest (20) (57)
Net income attributable to shareholders 503 (10) 560
Headline earnings adjustments: 23 21
Impairment of investments, goodwill
and capital assets 147 32
Realisation on decapitalisation
of subsidiary (40) -
Surplus on disposal of businesses (88) -
Surplus on sale of associates - (11)
19 21
Attributable to outside shareholders 4 -
Headline earnings 526 (10) 581
Shares in issue: (millions)
Ordinary shares 28 30
`N` ordinary shares 55 63
Total number of shares 83 93
Weighted average number of shares
in issue (millions) 90 94
Earnings per share (cents)
Attributable 557 (6) 595
Headline 583 (6) 618
Group balance sheet
at 30 September
Reviewed Audited
2002 2001
R million R million
ASSETS
Non-current assets
Property, plant and equipment 199 118
Intangible assets 9 10
Investment in associates 46 470
Investments and long-term receivables 1 681 1 682
Deferred taxation 20 12
1 955 2 292
Current assets
Liquid and trading assets 2 032 2 078
Other receivables 486 537
Cash and cash equivalents 2 612 2 130
5 130 4 745
Total assets 7 085 7 037
EQUITY AND LIABILITIES
Equity
Ordinary shareholders` funds 4 816 4 573
Outside shareholders` interest 341 185
5 157 4 758
Non-current liabilities
Long-term liabilities 401 367
Deferred taxation 72 39
473 406
Current liabilities
Trading liabilities 756 1 535
Other payables 699 338
1 455 1 873
Equity and liabilities 7 085 7 037
Net asset value per share (cents) 5 838 4 908
The following exchange rates were used at 30 September 2002: US$1=R10,5362;
euro1=R10,4171; GBP1=R16,5713
Group cash flow statement
for the year ended 30 September
Reviewed Audited
2002 2001
R million R million
Net income before taxation 683 687
Adjustments for non-cash items 261 1
Operating income 944 688
Net funding of operating assets, taxation
and dividend (919) (435)
Net cash inflow from operating activities 25 253
Net cash inflow/(outflow) from investing activities 636 (457)
Net cash (outflow)/inflow from financing activities (695) 122
Net decrease in cash and cash equivalents (34) (82)
Net cash and cash equivalents at beginning
of period 2 130 1 928
Exchange rate adjustments 516 284
Net cash and cash equivalents at end of period 2 612 2 130
Group statement of changes in equity
for the year ended 30 September
(2002 - reviewed, 2001 - audited)
Share Non-
capital distri- Distri-
and butable butable
R million premium reserves reserves Total
Balance at 1 October 2000
as previously reported 2 106 53 1 616 3 775
Change in accounting policy
for dividends - - 141 141
Balance at 1 October 2000
as restated 2 106 53 1 757 3 916
Net share issues and adjustments 5 12 (13) 4
Repurchase of shares (50) - - (50)
Foreign exchange
translation difference - 284 - 284
Net income - - 560 560
Dividends paid - - (141) (141)
Balance at 30 September 2001 2 061 349 2 163 4 573
Net share issues and adjustments - 6 (6) -
Repurchase of shares (588) - - (588)
Foreign exchange
translation difference - 516 - 516
Revaluation of investment
in subsidiary - 36 - 36
Net income - - 503 503
Dividends paid - - 224) (224)
Balance at 30 September 2002 1 473 907 2 436 4 816
Segment contribution
for the year ended 30 September
2002 2001
Local Inter- Total Local Inter- Total
national national
R million % % % % % %
Coronation
Fund Managers 116 23 136 27 252 50 135 24 106 19 241 43
Coronation
Capital 194 39 (67) (13) 127 26 241 43 56 10 297 53
African
Harvest 27 5 - - 27 5 - - - - - -
Investments 95 19 2 - 97 19 (48) (9) 70 13 22 4
Total 432 86 71 14 503 100 328 58 232 42 560 100
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 : Coronation place, Freestone Park, 135 Patricia Road Sundown
Postal address: PO Box 652643, Benmore 2010
Transfer secretaries: Computershare Services Limited, Edura House,
41 Fox Street, Johannesburg 2001
Website: www.coronation.co.za
Date: 11/11/2002 12:02:37 PM Produced by the JSE SENS Department
