Strong outperformance and leading with purpose results in an exceptional year for Coronation
23 November 2021
- Assets under management: R634 billion
- Diluted headline earnings per share: 487.9 cents
- Fund management earnings per share: 470.9 cents
- Final dividend per share: 226.0 cents
Cape Town, 23 November 2021 – Long-term valuation-driven asset manager Coronation Fund Managers today announced its annual results for the 12 months to end-September 2021.
Coronation’s annual results release marks an extraordinary 607 days since South Africa’s first hard lockdown was implemented to stem the spread of Covid-19. The global economic recovery continues, albeit unevenly, with a significant divergence in policy support and vaccine rollout across developed and emerging economies. Although the economic outlook is positive, it needs to be seen in the context of elevated risk and high asset prices. The risk of new coronavirus variants, enduring inflation, the withdrawal of unprecedented monetary and fiscal policy and rising geopolitical tensions make for uncertain times. Locally, the economy remains under pressure due to ongoing systemic risks, including unsustainable levels of government debt, corruption, the poor condition of State-owned enterprises, load shedding and increasing levels of already high unemployment.
Says Coronation CEO Anton Pillay, “Looking ahead, we are hoping for a ramp up in vaccine rollouts across the country, so that the economy can sustain more normal levels of activity. As of 2 November 2021, our full complement of Coronation employees has returned to the office, under strict Covid-19 protocols.”
An exceptional year for Coronation clients and stakeholders
“Despite the challenging backdrop, the past year has been exceptional for Coronation’s clients and shareholders,” continued Pillay. “Markets continued to perform strongly in 2021 after coming off the low base of March 2020.”
Strong outperformance of the underlying markets in client mandates contributed to excellent results for the 12 months ended 30 September 2021, with revenue and earnings up 17% and 23%, respectively, from the prior year. “We believe that the outperformance enjoyed by our clients is the result of an unwavering commitment to active, long-term investing, in-depth proprietary research and the benefits that come from a stable and experienced team,” says Pillay.
Given the strong outperformance across Coronation’s portfolios, average AUM increased by 9% year on year to R617 billion (September 2020: R565 billion) and year-end AUM is up 11% to R634 billion (September 2020: R569 billion). However, Pillay highlighted that, as an investment-led business, their primary focus remains on growing the value of the client assets entrusted to them over the long term, rather than simply looking to grow the pool of assets under management.
Total operating expenses increased by 8% compared to the 12 months ended 30 September 2020, with the highest growth attributed to the increased regulatory burden and investment in information systems and technology. Fixed costs are up 5% compared to the prior year. Pillay commented that the company continues to invest in information systems and technology infrastructure, which is key to delivering on their promise of superior client service.
Diluted and basic headline earnings per share increased by 22% to 487.9 cents (September 2020: 398.5 cents). Management measures operating financial performance based on earnings from fund management activities. This excludes the net impact of fair value gains and losses, and related foreign exchange, on investment securities held. Fund management earnings per share increased by 23% for the period to 470.9 cents (September 2020: 383.1 cents).
Despite the very positive reporting period for Coronation’s clients and shareholders, the pressure of economic lockdowns continued to exacerbate the plight of the already stressed local savings industry. As a sizeable industry participant, it is likely that Coronation will continue to reflect the outflow experience of the broader South African savings industry. The company expects this to remain the case for the foreseeable future. For the year, Coronation had outflows of 5% of the average AUM.
Business Update and Corporate Citizenship
Coronation is a significant custodian of the savings of millions of South Africans, as well as several international retirement funds, endowments, and family offices. This is a fiduciary responsibility that the company takes very seriously.
“We are an active corporate citizen, committed to contributing to the health and prosperity of South African society and the economy. We have been privileged to be able to operate efficiently throughout lockdown. We have not had to retrench or furlough employees, nor did we require any government relief,” says Pillay.
Pillay explains that the company’s culture and values are important factors in delivering on their commitment to be responsible stewards of client assets. “We understand that we have been granted a social licence to operate. We continue to make progress in our diversity representation across both race and gender.”
Of Coronation’s South Africa-based employees, key senior leadership positions are occupied by black individuals, including our CEO, CFO, COO, Head of Institutional Business, Head of Fixed Income and Head of SA Equity Research. R269 billion of AUM are managed by black investment professionals and 51% of employees are female. Coronation is a level 2 contributor to broad-based black economic empowerment (B-BBEE) and is 30% black owned.
“We will continue to promote and build a transformed financial services industry and an inclusive society through our recruitment process, our black enterprise development initiatives and corporate social investment programmes,” says Pillay.
In addition to supporting existing social investment programmes and their black brokerage and adviser businesses, Coronation’s corporate citizenship actions remained focused on Covid-19 relief programmes. Says Pillay, “We made a further commitment of R6.4 million, including donations to food security organisations, FoodForward SA and Ladles of Love, and the Solidarity Fund's vaccine rollout programme.”
“We are also an active participant in industry and government-related engagements to find solutions to help mitigate the socioeconomic effects of the lockdowns, boost employment levels and set South Africa on the road to economic recovery,” says Pillay.
Governance and Stewardship
Prof Alexandra Watson was appointed as Board Chairperson effective 10 August 2021, with Mr Saks Ntombela assuming the role as lead non-executive independent director. In June, Jock McKenzie resigned from the Board after 12 years of service.
Coronation has separated the former Audit and Risk Committee into two committees. The Audit Committee now comprises Ms Lulama Boyce (Chair); Mr Saks Ntombela, Mrs Madichaba Nhlumayo and Dr Hugo Nelson; while the Risk Committee membership includes Mr Saks Ntombela (Chair), Ms Lulama Boyce, Mrs Madichaba Nhlumayo, Dr Hugo Nelson and Mr Neil Brown. “We will continue to ensure that our Board sustains the skills and diversity that are essential for effective oversight of a large, global asset manager,” says Pillay.
Coronation has been an active steward of client capital for almost 30 years and fully integrates environmental, social and governance considerations into investment and business processes. This includes active engagement, voting and shareholder activism.
Their latest Stewardship Report, which reports on a calendar year basis, reflects that the investment team had 256 active engagements with 121 companies.
Governance was again a central engagement theme, representing more than 60% of their team’s engagements with investee companies. Also of note was the meaningful increase in engagements on climate-related risks. Against the backdrop of the much-vaunted COP 26, Coronation continued to engage on this matter. It is a challenging undertaking given the complexity of this process and the significant consideration required by companies at Board level.
“As a signatory to the TCFD and a member of Climate Action 100+, we fully support the move to a greener, more sustainable and equitable world and will continue in our endeavours to engage on these matters” says Pillay. “
For more information on the impact of Covid-19, Coronation’s stance on climate matters and investment stewardship activities, please consult their third annual Stewardship Report, which is available on www.coronation.com.
Putting clients first
Reflecting on the results, Pillay commented, “Covid-19-induced volatility created investment opportunities that don’t present themselves often. We took advantage of many of these on behalf of our clients and the result was outstanding performance across much of our product range,” says Pillay. “We remain focused on actively managing our clients’ portfolios to ensure we continue to deliver excellent long-term performance.”
Analyst enquiries: Johannes van Niekerk, CapitalVoice
082 921 9110
Media enquiries: Fiona Kalk, Coronation
021 680 2584
We manage R634 billion (September 2020: R569 billion) on behalf of our South African and global institutional clients.
South African institutional clients
We continue to manage a meaningful share of assets in the local retirement fund industry, representing a total AUM of R293 billion (September 2020: R251 billion), making us one of the largest independent managers of retirement assets in the country.
We manage a total of R74 billion (September 2020: R79 billion) in our global strategies on behalf of several leading international retirement funds, endowments and family offices.
With retail assets totalling R267 billion (September 2020: R239 billion), we are a significant independent manager of South Africa’s household savings and investments.
As one of the largest independent asset managers in South Africa, we invest the long-term savings of millions of South Africans. Our clients include individuals, retirement funds, medical schemes and financial institutions. We also manage assets for several leading international retirement funds, endowments and family offices. Our core objective is to deliver investment excellence, which is underpinned by five focus areas, namely: excellent long-term performance, building a global franchise, world-class client service, active corporate citizenship, and effective governance. Our culture and values are important factors in delivering on our commitment to being responsible stewards of our clients’ assets, and we understand that we have been granted a social license to operate. We earn this in the way in which we invest and in the way in which we operate. We achieve this through considering environmental, social and governance (ESG) factors in our investment decision-making process, our corporate citizenry and corporate social investment projects.
Any information being provided herein (the “Information”) is not designed for use in any jurisdiction or location where the publication or availability of the Information would be contrary to local law or regulation. If you have access to the Information, it is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction and it is recommended an investor first obtain appropriate legal, tax, investment or other professional advice prior to acting upon the Information. Coronation Asset Management (Pty) Limited, Coronation Investment Management International (Pty) Limited and Coronation Alternative Investment Managers (Pty) Limited are authorised Financial Services Providers regulated by the Financial Sector Conduct Authority of South Africa. Coronation Asset Management (Pty) Limited, Coronation Investment Management International (Pty) Limited and Coronation Alternative Investment Managers (Pty) Limited are subsidiary companies of Coronation Fund Managers Ltd, a company incorporated in South Africa and listed on the JSE (ISIN: ZAE000047353). The Information is for information purposes only and does not constitute or form part of any offer to the public to issue or sell, or any solicitation of any offer to subscribe for or purchase an investment, nor shall it or the fact of its distribution form the basis of, or be relied upon in connection with, any contract for investment. Unit trusts should be considered a medium- to long term investment. The value of units may go down as well as up, and is therefore not guaranteed. Past performance is not necessarily an indication of future performance. Note that individual investor performance may differ as a result of the actual investment date, the date of reinvestment of distributions and dividend withholding tax, where applicable. Where foreign securities are included in a fund it may be exposed to macroeconomic, settlement, political, tax, reporting or illiquidity risk factors that may be different to similar investments in the South African markets. Fluctuations or movements in exchange rates may cause the value of underlying investments to go up or down. Coronation Management Company (RF) (Pty) Ltd is a Collective Investment Schemes Manager approved by the Financial Sector Conduct Authority in terms of the Collective Investment Schemes Control Act. Unit trusts are traded at ruling prices set on every trading day. Unit trusts are allowed to engage in scrip lending and borrowing. Coronation Fund Managers Limited is a Full member of the Association for Savings & Investment SA (ASISA). Opinions expressed in this document may be changed without notice at any time after publication. Nothing in this document shall constitute advice on the merits of buying and selling an investment. Coronation Life
Assurance Company Limited is a licensed insurer under the Insurance Act, No.18 of 2017.