Coronation delivers a good set of results
11 November 2014 - Coronation Insights
- Assets under management at 30 September of R588 billion, up 20%
- Diluted headline earnings per share of 571.6 cents, up 37%
- Total dividend per share of 571 cents
Leading independent long-term investment house Coronation Fund Managers (Coronation) today announced a good set of results for the 12 months to 30 September 2014.
Revenue increased by 31% to R4.8 billion for the financial year from the substantially increased asset base combined with good investment performance. Profit from fund management increased by 35% to R2.7 billion and diluted headline earnings per share by 37% to 571.6 cents (September 2013: 416 cents).
Chief executive officer Anton Pillay commented: “Coronation is a cyclical business with a proven investment philosophy and an impressive long-term track record. During the period under review, our strong investment performance was supported by a positive market environment for a large part of the year; however, in September equity markets sold off as commodity prices plummeted and emerging markets fell sharply.”
Assets under management increased by 20% to R588 billion (September 2013: R492 billion) for the year, supported by total net inflows of R32 billion. In line with the company’s strategy to grow its global franchise, international products represented 65% (R21 billion) of this inflow. Total international assets under management grew by 49% to R127 billion (September 2013: R85 billion).
Net flows into the institutional business were close to zero, with inflows to the Emerging Market product countering outflows from the mature South African business.
“Investors should expect our domestic institutional business to continue to experience outflows, given our strategic decision to close the SA Equity product and the Balanced and Absolute Return product to new clients in 2012,” said Pillay
Coronation’s long-term track record is evident in the 1st quartile rankings over all meaningful periods, considered to be in excess of 5 years, by virtually all of its institutional products.
The balanced funds have consistently delivered top-quartile performance over meaningful periods in the Alexander Forbes SA Large and Global Large Manager Watch™ surveys. The house’s longest-running domestic equity fund, Houseview Equity, has delivered annualised alpha of 3.2% (gross of fees) since its inception in October 1993.
Global Absolute, the first-to-market absolute portfolio, produced alpha of 5.3% per annum (gross of fees) since inception in August 1999. And the specialist bond portfolio, Strategic Bond, has outperformed the local bond market by 1.7% per annum (gross of fees) since inception in January 2008.
The Emerging Market and Africa products, managed from Cape Town, have continued to produce both market- and peer-beating returns since their respective launch dates in 2008. The Coronation Global Emerging Markets Fund has generated annualised alpha of 7.0% (gross of fees in US dollars) since July 2008, while the Coronation Africa Frontiers portfolio has outperformed its benchmark by 12.9% per annum (gross of fees in US dollars) since October 2008.
The retail business continued to attract a disproportionate level of industry flows, with total net inflows for the year under review amounting to R32 billion across Coronation’s domestic fund range. “We do not expect flows at these levels to persist in the years ahead,” Pillay cautioned.
Coronation is now the largest manager of long-term retail assets in the local collective investment schemes industry, with a market share of 15.1% (September 2013: 13.6%). For the second consecutive year, Coronation was named Raging Bull South African Management Company of the Year, and for the fourth consecutive year, Morningstar Best Large Fund House.
Coronation continues to reward shareholders through regular and significant distributions of free cash flow generated and endeavours to distribute at least 75% of after-tax cash profit. Accounting for projected cash requirements, a final gross dividend of 296 cents per share has been declared, resulting in a final net dividend of 251.6 cents per share. Together with the interim gross dividend of 275 cents per share, this amounts to a total gross dividend of 571 cents per share for the year.
Coronation has been cautioning investors for some time to expect lower returns from markets.
“The declines in both the local and global equity markets in September and October have reminded investors that markets do not always follow an upward trajectory,” Pillay warned.
“Coronation is a cyclical business that has benefited from strong markets and excellent performance across our fund range. Earnings are highly geared to market returns and shareholders should not expect earnings to grow every year off the current high base,” he said.
In conclusion Pillay commented: “Volatility typically presents an opportunity to long-term investors. We therefore welcome recent market volatility as an opportunity to add value in client portfolios. We will diligently stick to our single-minded pursuit of identifying long-term value”.
Coronation Fund Managers
Anton Pillay 021 680 2215
Louise Pelser 021 680 2216
076 282 3995
Johannes van Niekerk 082 921 9110
For the financial year, the MSCI World Index returned 12.8%, while the MSCI Emerging Markets Index delivered 4.7% (both in US dollar terms). The South African equity market produced a US dollar return of 2.6% over the same period, amounting to 15.4% in rand terms. Continuing its decline, the rand lost 11% against the US dollar (to close at R11.28) and 4.8% against the euro (to close at R14.24). The currency remained among the worst performing emerging market currencies over the period.
Retail fund performance
As at 30 September 2014, all domestic and international flagship funds ranked in the 1st quartile of their respective Morningstar categories since launch, the highlights of which include:
- Coronation Top 20 has outperformed its benchmark by 5.6% p.a. (after fees) since launch in October 2000.
- Coronation Balanced Plus, the no. 1 multi-asset high equity fund in South African since launch in April 1996, has outperformed its average competitor by 2.7% p.a. (after fees) over the same period.
- Coronation Balanced Defensive, the no. 1 multi-asset low equity fund in South Africa since inception in February 2007, has outperformed inflation by 4.8% p.a. (after fees) over the same period.
- Coronation Strategic Income, the no. 1 multi-asset income fund since inception in July 2001, has outperformed cash on average by 2.9% p.a. (after fees) over the same period.
- Coronation Global Opportunities Equity [ZAR] Feeder, the no. 1 global equity general fund in South Africa since inception in August 1997, has outperformed the global equity market by 1.5% p.a. (after fees in rands) over the same period.
- Coronation Global Managed [ZAR] Feeder, the no. 1 global multi-asset high equity fund in South Africa since inception in October 2009, has outperformed its composite benchmark by 1.6% p.a. (after fees in rands) over the same period.
Any information being provided herein (the "Information") including information relating to the Coronation range of funds (the "Funds") are 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 (regulated by the Financial Services Board of South Africa) or one of its affiliated entities (together "Coronation") is the investment manager to the Funds. Coronation Asset Management (Pty) Limited is a subsidiary company of Coronation Fund Managers Limited, 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 in the Funds, nor shall it or the fact of its distribution form the basis of, or be relied upon in connection with, any contract for investment in the Funds. Any such offer shall only be made pursuant to the offering material regarding the Funds. The Funds are subject to management, administration and performance fees. Past performance is not necessarily a guide to future performance. Investors may not receive back the full amount invested and may suffer capital loss. Investments in the Funds may not be readily realisable. 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. All income, capital gains and other tax liabilities that may arise as a result of participating in this investment structure, remain that of the investor.