| Tue 15 Nov 2005, 7:00 | | Coronation - Reviewed financial results for the ye |
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Coronation - Reviewed financial results for the year ended 30 September 2005
Coronation Fund Managers
(Incorporated in the Republic of South Africa)
(Registration Number: 1973/009318/06)
Share Code: CML & ISIN: ZAE000047353
Attributable earnings per share of 48,5 cents, up 48%
Diluted headline earnings per share of 44,5 cents, up 33%
Final distribution of 36 cents per share
Assets under management of R82 billion, up 29%
Thys du Toit, CEO commented:
"We are very pleased with our performance for the year to September. We have
done well for our clients and that has benefited all our stakeholders. We have
the right strategy in place upon which we can grow a long term sustainable
business. We remain singularly focused on fund management and are very excited
about our imminent launch into third generation tax-effective retirement
products."
15 November 2005
Enquiries:
Coronation Fund Managers 021 680 2000
Thys du Toit 082 990 6930
John Snalam 083 309 6145
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Louise Brugman 083 504 1186
REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005
Coronation Fund Managers Limited ("Coronation") has once again confirmed its
place as a leader in the South African investment management industry. Strong
domestic markets, superior investment performance and a strategy firmly focused
on growing a sustainable business, combined to produce an impressive set of
results for 2005.
The integrity of our investment philosophy and ability to produce alpha is
consistently reflected in the returns of our institutional and unit trust
portfolios. We strongly believe in the equitable treatment of all clients, where
all Coronation client portfolios reflect the same "DNA" in their construction.
An example of this consistency is seen in terms of our relative position in both
the retail and institutional performance surveys. In the retail business we have
dominated 1st and 2nd place for 20 consecutive quarters in the Plexus Survey to
end September 2005, and are the Raging Bull Unit Trust Company of the Year for
2004; while in the Alexander Forbes SA Large Manager Watch for institutional
fund managers we are in 2nd position over one and three years and 3rd over five
years.
ASSETS UNDER MANAGEMENT
Strong domestic markets and exceptional investment performance, together with
significant net retail inflows, increased total assets under management by some
29% from R63,7 billion at 30 September 2004 to R82 billion at 30 September 2005.
Approximately 60% of these assets has a performance fee component.
Institutional assets under management grew 24% to R61,4 billion (2004: R49,6
billion) and domestic retail assets by 76% to R13,7 billion (2004: R7,8
billion). International assets under management at year end are US$1,1 billion.
RESULTS
Coronation has delivered an impressive 49% increase in revenue to R580 million.
Headline earnings per share increased by 40% to 47,6 cents and diluted headline
earnings per share by 33% to 44,5 cents. The dilution takes into consideration
the weighted average effect of the potential issue of 43 million shares in or
about 2015 in terms of the Imvula transaction. Cash earnings remained strong.
Performance fees, trading income and initial charges increased by R127 million
or 106% to R247 million. The cost to revenue margin improved to 53% from 56%.
This was despite a significant restraint of trade payment incurred in the first
half of the year.
The effective tax rate increased from 25% in 2004 to 31% in the current year.
This was mainly as a result of the increased secondary tax on companies on the
dividend paid in December 2004.
OPERATIONAL REVIEWS
Institutional
Our specialist equity portfolios continue to top the performance surveys,
delivering an annualised outperformance of 5,4% over the markets for the past
five years to end September 2005. Also dominating the top spot throughout the
year were our flagship domestic balanced portfolios, ending in 2nd position in
the Alexander Forbes SA Large Manager Watch over one year, and in 2nd and 3rd
positions over the longer-term three and five-year periods. The absolute return
funds also produced strong returns ahead of their benchmarks. In particular, the
Coronation Absolute Fund yielded a convincing outperformance of 7,7% per annum
since inception in August 1999 of its inflation +7% benchmark.
Significant inflows, backed by exceptional performance, have resulted in the
closure of the Absolute Investments Unit to new investors as at the end of
September 2005. This is the fulfilment of a promise made to investors at the
time of launch that, upon reaching critical mass of R10 billion, the unit would
be closed to new investors. This action, however, does not place limitations on
our ability to manage other assets with an absolute orientation. For example, we
see the development of our hedge fund franchise as an important and integral
part of our business and continue to build on our existing five-year track
record in this area and also to grow the product range.
Retail
The favourable conditions in the domestic financial markets were supported by a
continued structural shift in the composition of South Africa"s formal savings
industry in favour of the unit trust industry. At industry level this resulted
in a net inflow of R34,2 billion to long-term funds and a growth in assets to
R273,9 billion, while our position as a premier provider was firmly entrenched
with a growth in assets under management of 76%, to R13,7 billion (excluding
international).
We achieved excellent investment performance across all asset classes, and are
particularly pleased with both the relative and absolute performance of our core
fund range. Those funds which attracted significant interest were our managed,
equity, fixed interest and property funds, and in line with industry trends,
marginal outflows were experienced from the rand-denominated international
funds. Net inflows approaching R1,5 billion were received into our managed
funds, and almost R1 billion into the Coronation Strategic Income Fund,
confirming our competitive positioning in these fund categories. We remain in
the number 1 position in the Plexus Survey of unit trust management companies to
end September 2005 which confirms our positioning as the Raging Bull Unit Trust
Company of the Year.
Building on our superior performance track record and in line with government"s
goal of pension fund reform and the availability of cost-efficient retirement
funding vehicles, we have developed a range of individual retirement products
which will be launched early in 2006.
International
While South African investors have largely avoided investments in global markets
in recent times, we have continued to build a robust and credible international
fund of funds business. Over the year we have identified some very exciting
international product opportunities and remain focused on managing the
international assets of both our South African institutional and retail clients.
All funds in the range performed well, with the highlight being our flagship
institutional fund, the Coronation Global Equity Alternative Strategy Fund,
winning the InvestHedge "best large global long/short fund of funds of the year"
for 2004. This fund currently has assets in excess of US$500 million. Our long-
only funds, the Coronation Global Equity and International Active Fund of Funds,
both outperformed their benchmarks and combined, attracted new assets
approaching US$100 million despite the lack of appetite for international
products from the South African market.
OWNERSHIP
Through the conclusion of our BEE deal with the Imvula Trust, and the sale to
staff of a significant holding in Coronation by our major shareholder,
Coronation Investments and Trading ("CIT"), we have enhanced the long-term
sustainability of the business.
BEE shareholding
Coronation was the first financial services company to implement a "staff only"
empowerment transaction. On 1 April 2005, 10% of Coronation"s business was sold
to the Imvula Trust, the beneficiaries of which are all current (54 people) and
future black staff of Coronation. The deal was concluded at the market price of
385 cents and was 100% externally financed by a third-party financier to the
extent of R147 million. This unique transaction represents the largest financial
value per black staff member in the financial services industry.
Staff shareholding
In two separate deals, CIT sold 15% of its shareholding in Coronation to
Coronation staff. The first transaction involved the sale of 10% which was
effected in January 2005, and a further sale of 5% in September 2005. As a
result of these two transactions and the effective sale of 10% to the Imvula
Trust, as at 30 September 2005, staff own 25% of Coronation.
A total of 103 staff participated in these transactions.
THE FUTURE
It has been a dynamic and eventful year throughout which we have demonstrated
the true mettle of our people and our ability to produce exceptional investment
returns for clients. We have the right strategy in place upon which we continue
to grow a long-term sustainable business. We remain singularly focused on fund
management and are very excited about our imminent launch into third generation
tax-effective retirement products. The return to a culture of staff ownership
brings long-term incentivisation and the alignment of interests, which combined
ensure that if we do well for our clients, all stakeholders will benefit.
BOARD CHANGES
We are pleased to announce that Shams Pather joined the board as a non-executive
director and Louis Stassen as an executive director with effect from 9 November
2005. These appointments replace Eric Molobi (non-executive director) and Tony
Gibson (executive director) whom the Board wishes to thank for their valuable
contribution.
FINANCIAL STATEMENTS
The financial statements for Coronation have been prepared in compliance with
South African Statements of Generally Accepted Accounting Practice on a going
concern basis. The results have 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.
CAPITAL DISTRIBUTION
Subject to shareholder approval, shareholders are advised that the Board has
proposed a capital distribution ("the distribution") of R138 million payable to
Coronation shareholders in lieu of dividends, which equates to 36 cents per
ordinary share. This distribution will be written off against the share premium
account.
DIVIDEND
In view of the fact that a capital distribution is proposed, Coronation will not
be declaring a final cash dividend.
Gavan Ryan Thys du Toit Jacob Mahlangu
Chairman Chief Executive Officer Company Secretary
Cape Town
15 November 2005
Group income statement
For the year ended 30 September 2005 Reviewed Audited
2005 2004
R"000 R"000
Revenue 580 185 389 025
Management and service fees 313 128 263 308
Performance fees, trading income and initial 246 966 119 965
charges
Interest income 12 039 6 906
Investment income 647 17
Other income 7 405 (1 171)
Operating expenses (303 838) (217 597)
Interest expense (6 009) (1 993)
Net income before taxation 270 338 169 435
Income tax expense (84 398) (43 014)
Net income after taxation 185 940 126 421
Share of associates" retained income 967 116
Group income after taxation 186 907 126 537
Minority interest (586) -
Net income attributable to shareholders 186 321 126 537
Earnings per share (cents)
Attributable 48,5 32,8
Headline 47,6 33,9
Diluted earnings per share (cents)
Attributable 45,3 32,5
Headline 44,5 33,5
Dividends per share
The dividend for 2004 was 25 cents per share.
The special dividend for 2005 was 1 cent per
share.
Capital distributions
The special distribution for 2005 was 24 cents
per share.
The proposed final distribution for 2005 is 36
cents per share.
Group balance sheet
At 30 September 2005 Reviewed Audited
2005 2004
R"000 R"000
Assets
Equipment 5 539 5 684
Investment in associates - 3 706
Financial investments 119 857 120 575
Deferred tax asset 5 466 -
Long-term receivable - 1 660
Non-current assets 130 862 131 625
Financial investments 2 705 6 690
Securities held at fair value 20 447 14 378
Trade receivables 94 612 65 727
Other receivables 15 736 20 967
Cash and cash equivalents 245 752 143 667
Current assets 379 252 251 429
Total assets 510 114 383 054
Equity and liabilities
Ordinary share capital 38 38
Preference share capital 1 1
Share premium 1 815 93 561
Non-distributable reserve (11 247) (9 242)
Distributable reserves 229 477 141 373
Total shareholders" interest 220 084 225 731
Minority interest 586 -
Policyholders" funds 13 388 419 11 386 588
Linked assets backing policyholders" funds (13 388 419) (11 386 588)
Interest-bearing borrowing 148 000 38 871
Deferred tax liability 1 489 11 661
Non-current liabilities 149 489 50 532
Trade payables 108 320 69 046
Taxation owing 31 635 37 745
Current liabilities 139 955 106 791
Total equity and liabilities 510 114 383 054
Group cash flow statement
For the year ended 30 September 2005 Reviewed Audited
2005 2004
R"000 R"000
Net cash inflow from operating activities 73 100 53 079
Operating profit before working capital
changes 252 134 188 542
Working capital changes 15 225 (53 532)
Cash flows generated from return on
investments 12 206 4 930
Taxation paid (106 147) (39 986)
Dividends paid (100 318) (46 875)
Net cash outflow from investing activities (25 264) (51 313)
Net cash inflow/(outflow) from financing
activities 56 254 (9 784)
Net increase/(decrease) in cash and
cash equivalents 104 090 (8 018)
Cash and cash equivalents at
beginning of year 143 667 157 029
Exchange rate adjustments (2 005) (5 344)
Cash and cash equivalents at end of year 245 752 143 667
Group statement of changes in equity
For the year ended 30 September 2005 Reviewed Audited
2005 2004
R"000 R"000
Equity at beginning of year 225 731 150 207
Reduction in share capital (91 746) -
Currency translation differences (2 005) (5 326)
Net income attributable to shareholders 186 321 126 537
Dividends paid (100 318) (46 875)
Revaluation of available-for-sale financial
investments 2 101 1 188
Equity at end of year 220 084 225 731
Earnings per share
Reviewed Audited
2005 2004
R"000 R"000
Undiluted
Earnings attributable to shareholders,
calculated as follows:
Net income attributable to shareholders 186 321 126 537
Less: Dividend on convertible cumulative
redeemable preference shares (927) (1 002)
Earnings attributable to ordinary
shareholders 185 394 125 535
Diluted earnings attributable to ordinary
shareholders, calculated as follows:
Net income attributable to shareholders 186 321 126 537
Add: Secondary tax on companies - dividend on
redeemable preference shares 807 125
Diluted earnings attributable to ordinary
shareholders 187 128 126 662
Headline earnings per share
Undiluted
Headline earnings calculated as follows:
Earnings attributable to shareholders 185 394 125 535
Add: Capital expenses 1 355 2 207
Write-down of investment in associate - 1 315
Profit on sale of investment in
associates (4 934) -
Loss on disposal of equipment 160 450
Headline earnings 181 975 129 507
Diluted headline earnings 183 709 130 634
Diluted number of shares
Weighted average number of shares in issue
(thousand) 382 275 382 275
Shares to be issued on conversion of
convertible cumulative redeemable
preference shares 7 600 7 600
Weighted shares to be issued - 2003 Employee
share Incentive Scheme 1 513 -
Weighted shares to be issued - BEE
transaction 21 744 -
Weighted average number of shares in issue
for diluted earnings per share (thousand) 413 132 389 875
Segmental report
South African International Group
operations operations
For the year ended 30 September Reviewed Reviewed Reviewed
2005
Primary R"000 R"000 R"000
Segment revenue 517 078 63 107 580 185
Segment net income before
taxation 252 502 17 836 270 338
Segment contribution to 92 8 100
headline earnings (%)
Segment assets 380 531 129 583 510 114
For the year ended 30 September Audited Audited Audited
2004
Primary R"000 R"000 R"000
Segment revenue 323 986 65 039 389 025
Segment net income before
taxation 144 120 25 315 169 435
Segment contribution to 84 16 100
headline earnings (%)
Segment assets 258 742 124 312 383 054
Reviewed Audited
2005 2004
Secondary R"000 R"000
Segment revenue
Institutional 346 126 197 556
Retail 170 952 99 985
International 63 107 91 484
580 185 389 025
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
Registration number: 1973/009318/06
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg 2001
JSE share code: CML & ISIN: ZAE000047353
Website: www.coronation.com
Date: 15/11/2005 07:00:42 AM Produced by the JSE SENS Department
