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CML
CML
Coronation Fund Managers Limited - Reviewed interim results for the six
months ended 31 March 2006
Coronation Fund Managers Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1973/009318/06)
Share Code: CML ISIN: ZAE000047353
("Coronation" or "the group")
- Assets under management increase to R94 billion
- Income from fund management up 33%
- Headline earnings per share up 27% to 24 cents per share
- Profit before IFRS 2 up 58%
Reviewed interim results for the six months ended 31 March 2006
Thys du Toit, CEO commented: "We are delighted with this strong set of
results underpinned by strong investment returns achieved for clients and, as
a consequence, all stakeholders. We aim to build a long-term sustainable
business focused on fund management which we believe will extend beyond
financial market cyclicality. We will continue to focus on `Investment
Excellence" for the benefit firstly of our clients and ultimately for our
shareholders and staff whose interests are significantly aligned."
Enquiries:
Coronation Fund Managers 021 680 2000
Thys du Toit 021 680 2015
John Snalam 021 680 2094
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Louise Brugman 083 504 1186
Coronation Fund Managers Limited, one of the country"s leading asset
management companies, again produced a strong financial performance for the
six months ended 31 March 2006. Over the period we capitalised on the
opportunities in the market to produce enhanced returns for clients and
shareholders and were recognised for our leading position in unit trusts by
being awarded the ACI/Raging Bull Unit Trust Company of the Year for 2005.
Results
These are Coronation"s first set of financial results prepared in accordance
with International Financial Reporting Standards (IFRSs). The main effect on
the reported earnings resulting from the conversion to IFRSs are share-based
payment charges in terms of IFRS 2. For the six-month period to 31 March 2006
these amount to R26 million compared to a charge of R2 million for the
comparable period to 31 March 2005. These charges are not tax deductible. If
these charges are ignored, earnings for the six months ended 31 March 2006
are 58% up on the previous comparable period.
Revenue for the six-month period ended 31 March 2006 was R311 million, up 23%
from R252 million for the comparable period to 31 March 2005. Income from
fund management activities increased 33% to R146 million from R110 million in
the six-month period to 31 March 2005.
Net income attributable to shareholders increased by 27% to R93 million from
R73 million. Headline earnings per share increased by 27% to 24,2 cents and
diluted headline earnings per share by 15% to 21,5 cents. Coronation"s cash
generation remained strong.
Assets under management
Total assets under management increased by 15% from R82 billion at 30
September 2005 to R94 billion at 31 March 2006.
Business highlights
Coronation retains its singular focus on fund management and the ongoing
support of our clients is vital to our success. As such, over the past six
months we have continued to concentrate our efforts on those areas which we
believe to be critical in building and maintaining a profitable business.
Investment excellence
We often make reference to the Coronation `DNA" which talks to the manner in
which all our portfolios are treated equally. Performance surveys and ranking
tables confirm the consistent strength of our investment performance over the
period:
The unit trust business was recognised as the Raging Bull Unit Trust Company
of the Year for the third time in four years for consistency of investment
performance of all funds under management. We also received six individual
fund ACI/Personal Finance Raging Bull awards.
We received seven gold medals at the Standard & Poor"s/Financial Mail
Investment Performance Awards for individual fund performances.
The 2005 PWC Banking Survey rated Coronation as `the best provider of retail
asset management services" in the country.
The most recent Alexander Forbes Large Manager Watch (to end March 2006)
places our domestic balanced portfolios 3rd over three and five years and 5th
over one year. In the Alexander Forbes Global Large Manager Watch we are
ranked 4th over five years.
The Coronation Granite Fixed Income Fund was named the best performing fund
in the fixed interest category at the annual Old Mutual Symmetry Hedge Fund
Awards.
Our long-only international funds continued to deliver strong returns with
the Coronation Global Equity Fund of Funds producing a US dollar return of
27,3% per annum for the last three years to 31 March 2006, outperforming the
MSCI World Index by 3,4%.
Product innovation
A significant event was the launch of a range of individual retirement
products which are transparent, flexible and cost-effective. The range
includes a Retirement Annuity Fund, Preservation Pension and Provident Funds,
Living Annuity and an Endowment Plan, each using Coronation"s award-winning
unit trust funds as the underlying investment vehicles.
Within the institutional market, we extended our domestic hedge fund offering
with the inclusion of the Coronation Presidio and Coronation pH7 funds. We
also launched the Coronation Capital Preserver Fund which combines our widely
used and highly regarded skills of stock picking and asset allocation with
our well-tested risk management techniques. From an international product
perspective we streamlined the range to cater for the varying risk and return
profiles of our South African clients.
Transformation
Coronation continues to make progress with employment equity, black staff
currently make up more than 50% of the total staff employed in South Africa.
Black employees are the only beneficiaries of the Imvula Trust. As at 31
March 2006 (taking into account the rise in the Coronation share price)
significant equity had been built up in the Trust. In addition to these
achievements, we also contributed to enterprise development through the
introduction of the Coronation Business Support Programme to assist six black
stockbroking companies and made significant contributions towards the
upliftment of both individuals and communities through our Growing
Entrepreneurs Programme, which was a nominee in the recent Proudly South
African Homegrown Awards.
The Coronation brand
Since January 2006 we have made a significant investment in the brand through
the launch of a new and exciting above-the-line advertising campaign. A key
component of the campaign was the creation of our first TV commercial which
features the lifeworks of Vincent van Gogh.
Prospects
The fund management industry, and Coronation in particular, is enjoying the
strong conditions in domestic financial markets, the continuance of which is
difficult to predict. It is our aim to build a long-term sustainable business
focused on fund management which we believe will extend beyond financial
market cyclicality. We will continue to focus on "Investment Excellence" for
the benefit firstly of our clients and ultimately our shareholders and staff
whose interests are significantly aligned.
Independent review by the auditors
The full interim announcement for the six months ended 31 March 2006 has been
reviewed by our auditors, KPMG Inc. Their unqualified review report is
available for inspection at the registered office of the company.
Capital distribution
Coronation"s policy is to declare one capital distribution per annum, payable
after the announcement of the year-end results.
Gavan Ryan Thys du Toit Jacob Mahlangu
Chairman Chief Executive Officer Company Secretary
Cape Town
16 May 2006
Condensed consolidated income statement
Six months Six months Full year
reviewed reviewed reviewed
2006 2005 % 2005
Notes R"000 R"000 Change R"000
Fund management activities
Revenue 1 310 535 251 650 23 547 718
Financial income 1 19 392 9 499 30 640
Interest and dividend 10 818 4 859 12 686
income
Other income 8 574 4 640 17 954
Operating expenses (178 353) (152 043) 17 (320 049)
Share-based payment 2 (25 822) (2 210) (18 038)
expense
Other expenses 3 (152 531) (149 833) 2 (302 011)
Interest expense (6 200) (196) (6 009)
Share of profit of 863 874 967
associates
Income from fund 146 237 109 784 33 253 267
management
Income attributable to
policyholder-linked assets
and investment 23 737 9 321 18 641
partnerships
Net fair value gains on
policyholder and
investment partnership
financial instruments 4,5 25 784 14 219 27 255
Administration expenses
borne by policyholders and
investors in investment 4,5 (2 047) (4 898) (8 614)
partnerships
Profit before tax 169 974 119 105 271 908
Income tax expense (76 816) (46 008) (103 039)
Taxation on shareholder (53 079) (36 687) (84 398)
profits
Taxation on policyholder
investment contracts 4 (23 737) (9 321) (18 641)
Profit for the period 93 158 73 097 27 168 869
Attributable to:
- equity holders of the 93 158 73 097 168 283
parent
- minority interest - - 586
Profit for the period 93 158 73 097 168 869
Earnings per share (cents)
- basic 24,2 19,0 27 43,8
- diluted 21,5 18,7 15 41,0
Note to the income
statement:
Headline earnings per
share (cents)
- basic 24,2 19,0 27 42,9
- diluted 21,5 18,7 15 40,2
Condensed consolidated balance sheet
Reviewed Reviewed Reviewed
31 March 31 March 30 September
2006 2005 2005
Notes R"000 R"000 R"000
Assets
Equipment 5 382 5 626 5 539
Investment in associates 9 733 4 580 -
Deferred tax assets 3 223 5 466 5 466
Investments backing
policyholder funds and
investments held through 4,5 16 230 675 12 516 273 13 579 288
investment partnerships
Financial assets available-for- 133 219 85 842 122 562
sale
Financial assets at fair value
through profit or loss 129 16 610 20 447
Trade and other receivables 97 783 95 411 110 348
Cash and cash equivalents 287 522 110 099 245 752
Total assets 16 767 665 12 839 907 14 089 402
Liabilities
Interest-bearing borrowing 145 510 - 148 000
Deferred tax liabilities 1 480 - 1 489
Policyholder investment
contract liabilities and
liabilities to holders of
interests in investment 4,5 16 230 675 12 516 273 13 579 288
partnerships
Income tax payable 65 564 32 778 31 635
Trade and other payables 115 332 82 471 108 320
Shareholder for dividend 452 472 -
Total liabilities 16 559 013 12 631 994 13 868 732
Net assets 208 652 207 913 220 670
Equity
Issued capital and reserves
attributable to equity holders
of the parent 208 652 207 913 220 084
Minority interest - - 586
Total equity 208 652 207 913 220 670
Condensed consolidated statement of changes in equity
Issued
capital
and
reserve
s
attribu
table
to
Share Foreign Share- equity
capital currenc based Re- holders
y
and Trans- Accum- Pay- Valu- of the Minor- Total
lation ulated ment ation ity
premium reserve earnings Rese- reserv parent inter equity
rve e est
Balan
ce at
30
Septe
mber
2004
- SA 93 600 (9 242) 140 185 1 188 225 731 225 731
GAAP
Share-
based
payme (3 569) 3 569
nt
expen
se
Balan
ce at
30
Septe
mber
2004
- 93 600 (9 242) 136 616 3 1 188 225 731 225 731
under 569
IFRS
Curre
ncy
trans (2 170) (2 170) (2 170)
latio
n
diffe
rence
s
Profi
t for 73 097 75 307 75 307
the
perio
d
- SA 75 307 75 307 75 307
GAAP
-
Adopt
ion
of
IFRS: (2 210) 2
share- 210
based
payme
nt
expen
se
Divid
ends (96 041) (96 (96
paid 041) 041)
Reval
uatio
n of
avail
able-
for- 5 086 5 086 5 086
sale
finan
cial
inves
tment
s
Balan
ce at
31 93 600 (11 113 672 5 6 274 207 207 913
March 412) 779 913
2005
Capit
al (91 746) (91 (91
distr 746) 746)
ibuti
on
Curre
ncy
trans 165 165 165
latio
n
diffe
rence
s
Profi
t for 95 186 111 014 111 600
the
perio
d
- SA 111 014 111 014 586 111 600
GAAP
-
Adopt
ion
of
IFRS: (15 828) 15
share- 828
based
payme
nt
expen
se
Divid
ends (4 277) (4 277) (4 277)
paid
Reval
uatio
n of
avail
able-
for- (2 (2 985) (2 985)
sale 985)
finan
cial
inves
tment
s
Balan
ce at
30 1 854 (11 204 581 21 3 289 220 084 586 220 670
Septe 247) 607
mber
2005
Capit
al (138 (138 (138
distr 197) 197) 197)
ibuti
on
Reall
ocati
on of
distr
ibuti
on to 130 880 (130
accum 880)
ulate
d
earni
ngs
Premi
um on
share 5 502 5 502 5 502
s
issue
d
Acqui
sitio
n of (586) (586)
minor
ity
inter
est
Curre
ncy
trans (3 813) (3 813) (3 813)
latio
n
diffe
rence
s
Profi
t for 93 158 93 158 93 158
the
perio
d
Share-
based
payme 25 25 822 25 822
nt 822
reser
ve
Divid
ends (745) (745) (745)
paid
Reval
uatio
n of
avail
able-
for- 6 841 6 841 6 841
sale
finan
cial
inves
tment
s
Balan
ce at
31 39 (15 166 114 47 10 208 208 652
March 060) 429 130 652
2006
Condensed consolidated statement of cash flows
Six months Six Full year
months
reviewed reviewed reviewed
2006 2005 2005
Notes R"000 R"000 R"000
Cash flows from operating 185 323 117 144 270 775
activities
Profit for the period 93 158 73 097 168 869
Income tax expense 76 816 46 008 103 039
Non-cash adjustments 15 349 (1 961) (1 133)
Working capital changes 39 895 2 798 15 225
Cash generated from operations 225 218 119 943 286 000
Interest paid (6 200) (196) (480)
Income taxes paid (40 653) (68 103) (124 787)
Net cash from operating activities 7 178 365 51 643 160 733
Net cash from investing activities 2 695 12 528 (12 579)
Net cash from financing activities 7 (135 477) (95 569) (44 064)
- distributions to shareholders (138 490) (95 569) (192 064)
- other 3 013 - 148 000
Net increase/(decrease) in cash
and cash equivalents 45 583 (31 398) 104 090
Cash and cash equivalents at
beginning of period 245 752 143 667 143 667
Exchange rate adjustments (3 813) (2 170) (2 005)
Cash and cash equivalents at end 287 522 110 099 245 752
of period
Condensed consolidated segment report
South International
Africa
operations operations Group
R"000 R"000 R"000
For the six months ended 31 March 2006
Fund management
Segment revenue 282 512 28 023 310 535
Segment other net income 14 448 (393) 14 055
Segment operating expenses (160 960) (17 393) (178 353)
Segment result 136 000 10 237 146 237
% contribution to headline earnings 92 8 100
For the six months ended 31 March 2005
Fund management
Segment revenue 222 363 29 287 251 650
Segment other net income 7 934 2 244 10 178
Segment operating expenses (129 281) (22 762) (152 043)
Segment result 101 016 8 769 109 785
% contribution to headline earnings 90 10 100
Notes to the condensed consolidated interim financial statements
Basis of preparation and transition to IFRSs
The group has adopted IFRSs for the year ending 30 September 2006. The
consolidated interim financial statements have been prepared in accordance
with the recognition and measurement principles of IFRSs for interim
financial statements, IAS 34: Interim Financial Reporting (IAS 34), the
requirements of the South African Companies Act, Act 61 of 1973, as amended,
and the Listings Requirements of the JSE Limited (JSE). These are the group"s
first IFRSs-consolidated interim financial statements for part of the period
covered by the first IFRSs annual financial statements and IFRS 1: First-time
Adoption of International Financial Reporting Standards (IFRS 1) has been
applied. The consolidated interim financial statements do not include all of
the information required for full annual financial statements.
The accounting policies have been applied consistently throughout the group
for purposes of preparing these consolidated interim financial statements.
An explanation of how the transition to IFRSs has affected the reported
financial position and financial performance of the group is provided. This
includes reconciliations of equity and profit after tax as reported for
comparative periods under SA GAAP, to that reported under IFRSs.
These consolidated interim financial statements have been prepared on the
basis of IFRSs in issue that are expected to be effective at the group"s
first IFRSs annual reporting date, 30 September 2006. Based on these IFRSs,
the Board of Directors has made assumptions about the accounting policies
expected to be adopted when the first IFRSs annual financial statements are
prepared for the year ending 30 September 2006.
The IFRSs that will be effective in the annual financial statements for the
year ending 30 September 2006 are still subject to change and to the issue of
additional interpretations and therefore cannot be determined with certainty.
Accordingly, the accounting policies for the annual period that are relevant
to this interim financial information will be finally determined only as and
when the first IFRSs financial statements are prepared for the year ending 30
September 2006.
Application of IFRS 1
IFRS 1 requires retrospective compliance with all IFRSs expected to be
effective at the end of the first IFRSs reporting period. However, it
contains a number of exemptions to this full retrospective application of
IFRSs. The group has applied the following exemption:
Business combinations
The group has elected not to apply IFRS 3: Business Combinations
retrospectively to business combinations that occurred prior to 1 October
2004. Accordingly, no adjustments have been made to the accounting treatment
of previous business combinations.
Accounting policies adopted on conversion to IFRSs
Share-based payment transactions
The fair value of share options under employee share incentive schemes and
other equity instruments granted to group employees is recognised as an
expense with a corresponding increase in equity. The fair value is measured
at grant date and expensed over the period during which the employee becomes
unconditionally entitled to the equity instruments. The fair value of the
instruments granted is measured using generally accepted valuation
techniques, taking into account the terms and conditions upon which the
instruments are granted. The amount recognised as expense is adjusted to
reflect the actual number of share options that vest except where forfeiture
is only due to market conditions not being met. This accounting policy has
been applied to all equity instruments granted after 7 November 2002 that had
not yet vested at 1 January 2005. Share-based payments were not recognised
under the group"s previous accounting policies.
Black economic empowerment transactions
Transaction recognition criteria
In circumstances where a portion of the equity in a subsidiary company is
disposed of and serves as security for the funding of the proceeds
receivable, the accounting recognition of the disposal of such shares in the
group financial statements is deferred until the funding subject to the
security of the equity sold has been fully repaid.
Share-based payment
The group is extending the scope of IFRS 2: Share-based Payment (IFRS 2) to
include the group"s black economic ownership initiatives in accordance with
international interpretations in this regard. Where goods or services are
received from black economic empowerment partners as consideration for equity
instruments of the group, then these transactions are accounted for in terms
of IFRS 2, even when the entity cannot specifically identify the goods and
services received.
Investment contract liabilities and associated linked investments
The financial instruments that arise as a result of the issuance of
investment policies by the group are accounted for in terms of IAS 32:
Financial Instruments - Presentation and Disclosure (IAS 32) and IAS 39:
Financial Instruments - Recognition and Measurement (IAS 39) and are
designated as financial instruments at fair value through profit or loss.
This designation significantly reduces a measurement inconsistency that would
otherwise arise. Commitments received from policyholders and benefit payments
made to policyholders are not recognised in the income statement. Changes in
the fair value of these financial instruments are recognised in the income
statement in the period in which they arise. The fair value of linked
investment contract liabilities is determined based on the fair value of the
associated linked financial asset and is net of the taxation payable on
investment gains. The taxation payable is separately disclosed as part of
taxation in the income statement.
Earnings per share
Basic earnings per share
Profit attributable to equity holders of the parent
Six Six Full
months months year
reviewed reviewed reviewed
2006 2005 2005
R"000 R"000 R"000
Basic earnings
Profit for the period attributable to equity
holders of the parent 93 158 73 097 168 283
Dividend on convertible cumulative
redeemable preference shares (452) (472) (927)
Profit attributable to equity holders of the 92 706 72 625 167 356
parent
Headline earnings
Profit attributable to equity holders of the 92 706 72 625 167 356
parent
Capital expenses - - 1 355
(Profit)/loss on disposal/scrapping of (2) (26) 160
equipment
Profit on disposal of investment in - - (4 934)
associates
Headline earnings attributable to equity
holders of the parent 92 704 72 599 163 937
Weighted average number of ordinary shares
Six Six Full
months months year
reviewed reviewed reviewed
2006 2005 2005
In thousands of shares
Issued ordinary shares at 1 October 382 275 382 275 382 275
Weighted average number of shares issued - 536 - -
31 January
Weighted average number of ordinary shares
for the period 382 811 382 275 382 275
Diluted earnings
Profit attributable to equity holders of the parent (diluted)
Six Six Full
months months year
reviewed reviewed reviewed
2006 2005 2005
R"000 R"000 R"000
Basic earnings (diluted)
Profit attributable to equity holders of the 93 158 73 097 168 283
parent
Secondary tax on companies - dividend on
convertible cumulative redeemable preference 56 - 116
shares
Profit attributable to equity holders of the
parent(diluted) 93 214 73 097 168 399
Headline earnings (diluted)
Profit attributable to equity holders of the
parent (diluted) 93 243 73 097 168 399
Capital expenses - - 1 355
(Profit)/loss on disposal/scrapping of (2) (26) 160
equipment
Profit on disposal of investment in - - (4 934)
associates
Headline earnings attributable to equity
holders of the parent (diluted) 93 241 73 071 164 980
Weighted average number of ordinary shares (diluted)
Six Six Full
months months year
reviewed reviewed reviewed
2006 2005 2005
In thousands of shares
Weighted average number of ordinary shares
for the period 382 811 382 275 382 275
Shares to be issued on conversion of
convertible cumulative redeemable preference 6 497 7 563 7 574
shares
Weighted shares to be issued - 2003 Employee
Share Incentive Scheme 2 436 148 793
Weighted shares to be issued - BEE 41 305 - 19 704
transaction
Weighted average number of ordinary shares
(diluted) for the period 433 049 389 986 410 346
Explanation of transition to IFRSs
These are the group"s first consolidated interim financial statements for
part of the period covered by the first IFRSs annual consolidated financial
statements prepared in accordance with IFRSs.
The accounting policies have been applied in preparing the consolidated
interim financial statements for the six months ended 31 March 2006, the
comparative information for the six months ended 31 March 2005, the financial
statements for the year ended 30 September 2005 and the preparation of an
opening IFRSs balance sheet at 1 October 2004 (the group"s date of
transition).
In preparing its opening IFRSs balance sheet, comparative information for the
six months ended 31 March 2005 and financial statements for the year ended 30
September 2005, the group has adjusted amounts reported previously in
financial statements prepared in accordance with SA GAAP.
An explanation of how the transition from SA GAAP to IFRSs has affected the
group"s financial position and financial performance is set out in the
following tables and the notes that accompany the tables.
Investment in associate
Coronation purchased 47,14% of the issued shares in Namibian Harvest
Investments Limited, which is listed on the Namibian Stock Exchange, for R8.9
million effective 1 October 2005.
Reviewed reconciliation of profit
For the six months ended For the year ended
31 March 2005 30 September 2005
Effect of transition to Effect of transition to
SA GAAP IFRS IFRSs SA GAAP IFRS IFRSs
Note R"000 R"000 R"000 R"000 R"000 R"000
s
Fund
manag
ement
activ
ities
Reven 1 262 719 (11 069) 251 650 580 185 (32 467) 547 718
ue
Finan 1 - 9 499 9 499 - 30 640 30 640
cial
incom
e
Inter - 4 859 4 859 - 12 686 12 686
est
and
divid
end
incom
e
Other - 4 640 4 640 - 17 954 17 954
incom
e
Opera (148 346) (3 697) (152 043) (303 838) (16 211) (320 049)
ting
expen
ses
Share- - (2 210) (2 210) - (18 038) (18 038)
based 2
payme
nt
expen
se
Other 3 (148 346) (1 487) (149 833) (303 838) 1 827 (302 011)
expen
ses
Inter (196) - (196) (6 009) - (6 009)
est
expen
se
Share
of - 874 874 - 967 967
profi
t of
assoc
iates
Incom
e 114 177 (4 393) 109 784 270 338 17 071 253 267
from
fund
manag
ement
Incom
e
attri
butab
le to
polic - 9 321 9 321 - 18 641 18 641
yhold
er-
linke
d
asset
s and
inves
tment
partn
ershi
ps
Net
fair
value
gains
on
polic
yhold 4,5 - 14 219 14 219 - 27 255 27 255
er
and
inves
tment
partn
ershi
p
finan
cial
instr
ument
s
Admin
istra
tion
expen
ses
borne 4,5 - (4 898) (4 898) - (8 614) (8 614)
by
polic
yhold
ers
and
inves
tors
in
inves
tment
partn
ershi
ps
Profi 114 177 4 928 119 105 270 338 1 570 271 908
t
befor
e tax
Incom (39 744) (6 264) (46 008) (84 398) (18 641) (103 039)
e tax
expen
se
Taxat
ion
on (39 744) 3 057 (36 687) (84 398) - (84 398)
share
holde
r
profi
ts
Taxat
ion
on
polic 4 - (9 321) (9 321) - (18 641) (18 641)
yhold
er
inves
tment
contr
acts
Profi 74 433 (1 336) 73 097 185 940 (17 071) 168 869
t
after
tax
Share
of
after- 874 (874) - 967 (967) -
tax
profi
t of
assoc
iates
Profi
t for 75 307 (2 210) 73 097 186 907 (18 038) 168 869
the
perio
d
Attri
butab
le
to:
-
equit 75 307 (2 210) 73 097 186 321 (18 038) 168 283
y
holde
rs of
the
paren
t
-
minor - - - 586 - 586
ity
inter
est
Profi
t for 75 307 (2 210) 73 097 186 907 (18 038) 168 869
the
perio
d
Reviewed reconciliation of equity
31 March 2005 30 September 2005
Effect of transition to Effect of transition to
SA GAAP IFRS IFRSs SA GAAP IFRS IFRSs
Note R"000 R"000 R"000 R"000 R"000 R"000
s
Share-based
payment 2 - 5 779 5 779 - 21 607 21 607
reserve
Accumulated
earnings 2 119 451 (5 779) 113 672 226 188 (21 607) 204 581
Notes:
1. Revenue
Revenue under SA GAAP included interest, dividend and other income.
These items have been reclassified as financial income in presenting the
income statement on adoption of IFRSs.
2. Share-based payments
The terms and conditions of the share option programmes, grants and BEE
transaction are disclosed in the most recent annual financial statements,
together with the assumptions applied in determining the value of services
received for these share grants and hence the share-based payment expense.
These assumptions and conditions are not reported in this interim
announcement and there are no material changes to these assumptions, other
than as noted below.
The share-based payment expense is made up as follows:
Six Six Full
months months year
reviewed reviewed reviewed
2006 2005 2005
Employee share incentive scheme 953 865 1 729
CIT share transactions 15 422 1 308 12 776
BEE transaction 3 064 - 3 459
Preference shares 6 383 37 74
25 822 2 210 18 038
The preference shares
On 30 September 2003, 7 600 000 convertible cumulative redeemable preference
shares were issued at 172 cents per share on terms and conditions as defined
in the company"s Memorandum and Articles of Association. The conversion terms
of the first tranche of shares were revised as per a resolution passed by the
directors of the company on 11 November 2005. Conversion rights vest over a
total period of 5 years from the grant date, subject to the achievement of
predetermined earnings per share and share growth targets.
60% after 3 years
- The market price per ordinary share of the group having increased at a
minimum rate of 10% per annum from an agreed base of R3.50 per ordinary share
at 30 September 2004, up to the relevant conversion date.
- The earnings per ordinary share having increased at a minimum rate of 10%
per annum from the base of 33.9 cents per share at 30 September 2004, up to
the relevant conversion date.
20% after 4 and 5 years
- The market price per ordinary share of the group having increased at a
minimum rate of 10% per annum from an agreed base of R4.60 per ordinary share
at 30 September 2004, up to the relevant conversion date.
- The earnings per ordinary share having increased at a minimum rate of 15%
per annum from the base of 66 cents per share at 30 September 2004, up to the
relevant conversion date.
The aforesaid earnings per share shall be calculated in accordance with SA
GAAP and on the basis of the accounting policies as applied in the financial
year ended 30 September 2002, except if they are required to be changed in
order to comply with SA GAAP at the date of each set of subsequent financial
statements. The directors are entitled in terms of the Articles of
Association to revise the predetermined earnings per share and share growth
targets.
The revision to the conversion terms has been treated as a modification in
terms of IFRS 2. The increase in the fair value of the instrument grants is
being recognised over the vesting period of 1 year. The IFRS 2 cost was
estimated using option pricing methodology. The material assumptions are
similar to those used to value the grants as disclosed in the most recent
annual financial statements.
3. Operating expenses
Certain items previously included as operating expenses have been
reclassified to financial income in presenting the income statement on
adoption of IFRSs.
4. Policyholder investment contracts and the associated linked assets
The investment policies issued by the group"s insurance subsidiary and the
associated linked investments backing these policies, were previously
accounted for and disclosed in terms of the SA GAAP statement dealing with
disclosure in the financial statements of long term insurers. On adoption of
IFRSs the financial assets and financial liabilities arising from these
policies are required to be accounted for in terms of IAS 32 and IAS 39 and
have been designated as financial instruments at fair value through profit or
loss. The revaluation on these financial instruments is now presented
separately in the income statement. The administration expenses and taxation
withheld on the linked policyholder investment policies are likewise
presented separately in the relevant line items in the income statement.
There is no net impact on reported profit after tax or equity in any of the
periods presented.
5. Investments held through investment partnerships and the associated
liability to investors in these partnerships
The group, through certain of its subsidiaries, is the disclosed partner and
principal investor in certain investment partnerships. These investment
partnerships have been consolidated and the financial assets and liabilities
controlled by the group have been designated as at fair value through profit
or loss on adoption of IFRSs. The impact of consolidation results in the
increase of assets and liabilities on the balance sheet of R90.6 million at
31 March 2005 and R190 million at 30 September 2005. The impact on the income
statement is reflected in the above reconciliations and there is no impact on
reported profit after tax or equity for any of the periods presented.
6. Balance sheet presentation
The presentation of assets and liabilities in the balance sheet has been
amended to be based on liquidity, as it provides information that is reliable
and more relevant.
7. Cash flow statement
There is no impact on the value of cash and cash equivalents as a result of
the adoption of IFRSs. Dividends paid were previously disclosed as part of
net cash from operating activities and have been reclassified so as to form
part of net cash from financing activities.
8. Multi-class open-ended investment company
The group is party to a multi-class open-ended investment company registered
offshore. It appears that in terms of IAS 27, this structure may require
consolidation. However, it is the intention of the group to take the
necessary steps so as to ensure that the uncertainties surrounding the
control of this structure are removed and to clearly establish that control
of the underlying fund classes rests with the holders of the participating
shares of each class. For the purposes of this interim announcement and the
comparatives, the underlying funds have not been consolidated, on the basis
that the directors believe that the funds underpinning this structure are
special purpose entities, the majority of the benefits of which accrue to the
holders of participating shares in each class, being the investors and
external clients of the group. The final outcome of these revisions will be
considered in preparing the group"s annual financial statements as at 30
September 2006. The impact on the income statement of having to consolidate
is not likely to be material.
Condensed consolidated income statement - separately reflecting the effect of
IFRSs
Six Six Full
months months year
2006 2005 % 2005
R"000 R"000 Change R"000
Revenue 310 535 251 650 547 718
Financial income 19 392 9 499 30 640
Operating expenses (152 531) (149 833) (302 011)
Income from fund management 177 396 111 316 276 347
Interest expense (6 200) (196) (6 009)
Share of profit of associates 863 874 967
Profit before tax 172 059 111 994 271 305
Income tax expense (53 079) (36 687) (84 398)
Profit for the period - before 118 980 75 307 58 186 907
IFRSs
Share-based payment expense (25 822) (2 210) (18 038)
Profit for the period - after 93 158 73 097 27 168 869
IFRSs
Basic earnings per share (cents) - 31,0 19,6 48,5
before IFRSs
Final capital distribution per - - 36,0
share (cents)
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) Limited, 70
Marshall Street, Johannesburg 2001
JSE share code: CML ISIN: ZAE000047353 Website: www.coronation.com
Date: 16/05/2006 07:00:48 AM Produced by the JSE SENS Department
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