Coronation profits drop in ‘highly volatile’ environment

File picture: Denis Farrell

File picture: Denis Farrell

Published May 18, 2016

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Johannesburg - JSE-listed Coronation Fund Managers yesterday reported a 7 percent decline in profit to R804 million during the six months to March, from R861m during the corresponding period last year.

The company said it expected price fluctuations to be heightened as the market remained cyclical.

Coronation chief executive Anton Pillay said the results were in line with their expectations.

“We are operating a cyclical business and our approach is long-term based,” Pillay said. “We are happy to be judged on our long-term results rather than a short period of time.”

The company said following an extended period of volatility in asset prices, it benefited from client portfolios that rallied strongly in emerging markets, commodities, equities and the property market since the start of the calendar year.

Pillay said Coronation had R606 billion assets under management as at the end of the reporting period. He said revenue declined by 5 percent to R2.1bn, from R2.17bn in the previous period.

“We have seen a highly volatile market environment, combined with total net outflows of R47bn, resulted in a marginal decline in assets under management over the six-month period to R606bn from R610bn in September 2015,” Pillay said.

The company also experienced a 6.9 percent decline in diluted headline earnings per share to 229.7c, down from 246.7c as compared with the last period. The firm, however, declared an interim dividend of 229c per share.

Pillay said the company’s Houseview Equity outperformed the market by 2.9 percent per annum and delivered 18.3 percent returns annually over the investment period.

He said the South African institutional business recorded net outflows of R36.5bn.

“This was driven largely by portfolio rebalancing in a shrinking occupational retirement fund market and the fact that we remain closed to new investors in our South Africa Equity and Multi-Asset portfolios, a decision implemented almost four years ago,” Pillay said.

Nolwandle Mthombeni, an analyst at Mergence Investment Managers, said Coronation had been able to grow assets under management consistently every quarter from September 2011 to March last year on the back of stellar performances.

Mthombeni said the company had, however, underperformed relative to their history.

“More importantly in many cases they have been underperforming their benchmarks resulting in investors pulling money and thus outflows increasing quite rapidly,” she said.

“Since the beginning of the year the resource stocks have a had a huge bounce and with that came the expectation from the market that Coronation would be able to claw back its underperformance due to its (being) overweight in resources in some of their funds. However, while the resources bounce has helped they are still significantly underwater in some of their funds.”

Coronation shares slumped 2.17 percent yesterday to R67.75.

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