Abundance of opportunities boosts performance, revenue; stewardship firmly in the mainstream
25 May 2021
- Assets under management: R629 billion
- Diluted headline earnings per share: 255.8 cents
- Fund management earnings per share: 244.0 cents
- Total dividend per share: 244.0 cents
Cape Town, 25 May 2021 – Long-term valuation-driven asset manager Coronation Fund Managers today announced its interim results for the six months to end-March 2021.
Coronation’s half year financial reporting period coincided with the one-year anniversary of the outbreak of the Covid-19 pandemic in South Africa and the country’s first hard lockdown. The unprecedented stimulus that was pumped into economies by central banks globally has buoyed capital markets, resulting in record-breaking short-term returns, boosting investment performance, which, in turn, saw an increase in revenue, AUM and performance fees.
Says Coronation CEO Anton Pillay, “The past year has been an exceptional one for Coronation’s clients and shareholders. This is a function of the sharp recovery in markets from March 2020 lows and the strong delivery of outperformance across our key mandates.”
“Market reaction to Covid-19 presented rarely-seen opportunities for active investors like us, which, in turn, we converted into strong returns for our client portfolios, which positively impacted our revenue. It is worth noting that we view this as a cyclical high for investment returns. The investment opportunities presented during the pandemic are unlikely to be repeated and future market returns are expected to be lower than those seen in the past year.”
Earnings, revenue and AUM significantly up
Results for the six months ended 31 March 2021 are excellent, with revenue and earnings from fund management up 23% and 36%, respectively, from the prior reporting period.
The Company continued to experience net outflows (representing 3.9% of our AUM at the beginning of the financial year). As a sizable industry participant, it is likely that Coronation will continue to reflect the flows experience of the broader South African savings industry, which we expect will remain under pressure in the foreseeable future. Notwithstanding this, and given the strong outperformance across our portfolios, average AUM increased by 7% year on year to R600 billion (March 2020: R562 billion) and total AUM is up 11% to R629 billion (September 2020: R569 billion). As an investment-led business, our primary focus remains on growing the value of the client assets entrusted to us over the long term, rather than simply looking to grow the pool of assets under our management.
Total operating expenses increased by 15% compared to the six months ended March 2020. Fixed costs are up 6% compared to the same period, as we continue to invest in technology and information systems infrastructure, which is key to delivering on our promise of superior client service.
Diluted and basic headline earnings per share increased by 44% for the period to 255.8 cents (March 2020: 178.3 cents). Management measures operating financial performance based on earnings from fund management activities, which exclude the net impact of fair value gains and losses, and related foreign exchange, on investment securities held. Fund management earnings per share increased by 36% for the period to 244.0 cents (March 2020: 179.4 cents).
BUSINESS UPDATE AND CORPORATE CITIZENSHIP
Coronation a large independent asset manager and 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 we take very seriously.
“Our culture and values are important factors in delivering on our commitment to be responsible stewards of our clients’ assets, and we understand that we have been granted a social licence to operate. With the growing emphasis on transformation, diversity and inclusion globally, we continue to make progress in our diversity representation across both race and gender. As measured by the Financial Sector Code scorecard, Coronation is a level 2 contributor to broad-based black economic empowerment (B-BBEE) and is 30% black owned,” says Pillay.
Coronation is an active corporate citizen that is committed to contributing to the health and prosperity of South African society and the economy. In 2020, we focused our corporate citizenship actions on Covid-19 relief programmes, and continued to do so into 2021. Our usual activities, such as our support of black brokerages, independent black adviser practices and social programmes, remain in place.
Coronation is also an active participant in industry and government-related engagements to find solutions to help mitigate the socio-economic effects of the lockdowns, boost employment levels and set South Africa on the road to economic recovery.
Governance and stewardship
As a large listed company, we commit to demonstrating the behaviours that we encourage elsewhere. To ensure that we maintain a robust and diverse Board of Directors (Board) with adequate succession planning in place, we announced the appointment of three new independent non-executive directors, Messrs Neil Brown, Phakamani Hadebe and Saks Ntombela, on 19 October 2020. “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 stewards of our clients’ capital for almost 30 years and fully integrate environmental, social and governance considerations into all of the assets that we manage on their behalf. This includes active engagement, voting and shareholder activism.
In the 2020 calendar year, our investment team had 256 active engagements with 121 companies. Of note was the meaningful increase in our engagements on climate-related risks. In a first for a South African asset manager, to date, we have written letters to 89 JSE-listed companies urging them to adopt the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) when reporting on climate risks in their businesses. Given the complexity of this process and the significant consideration required by companies at Board level, we have followed up on the letters with meetings. Coronation is a signatory to the TCFD and has committed to this reporting standard, and included our first carbon footprint analysis in our2020 Integrated Annual Report.
Our recently published third annual Stewardship Report discusses how Covid-19 placed sustainability issues and responsible investing front and centre of the investment stage. We have also disclosed our portfolio carbon footprints in the Report.
Says Pillay, “The impact of Covid-19 has tested the resilience of individuals, businesses, economies and governments across the globe, and the recent past has reminded all sectors of society to continue to expect the unexpected. Against this backdrop, deepening our understanding of, and focus on, stewardship, both within our business and in our investee companies, remains a priority.
“We will also continue to invest in our business and remain committed to playing our part as an active and responsible corporate citizen, especially given the current economic conditions.”
Analyst enquiries: Johannes van Niekerk, CapitalVoice
082 921 9110
Media enquiries: Fiona Kalk, Coronation
021 680 2584
We manage R629 billion (September 2019: 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 R287 billion (March 2020: R224 billion), making us one of the largest independent managers of retirement assets in the country.
We manage a total of R80 billion (March 2020: R68 billion) in our global strategies on behalf of several leading international retirement funds, endowments and family offices.
With retail assets totalling R262 billion (March 2020: R216 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.