Coronation pays out in tough times
However, AUM at the long-term value driven asset manager was flat when compared with the September 2018 financial year-end, after markets recovered strongly in the first quarter of this year.
An interim dividend of 165 cents per share was declared, in line with a policy of paying out 75 percent of cash profits. An improvement in results was expected in the second half, should the market conditions of the first three months continue, although markets had been softer globally since then, due to continued uncertainty about Brexit, the US-China trade dispute and global changes in “inter-connectivity,” chief executive Anton Pillay said on Tuesday.
The all share index gained 8 percent in the first quarter, but over a year the return was 2.7 percent
The MSCI Emerging Markets Index in US dollar terms was up only 9.9 percent in the first quarter, but only gained 1.7 percent over a year. Developed country markets, as measured by the MSCI All Country World Index, lost 2.1 percent for the reporting period, despite adding 12.2 percent in the first quarter.
Pillay said markets were “extremely challenging worldwide in the three months to end-December 2018.”
The decline in average AUM contributed to a 22 percent decrease in revenue to R1.6bn. However, the company’s unique variable cost model contributed to effective cost management.
“Our operating expenses decreased by 10 percent as a result of variable costs declining by 18 percent.”
The combined effect was a decrease of 26 percent in diluted and basic headline earnings per share for the period to 165.1c. Pillay said in the six-months period there had been a meaningful improvement in short-term performance “across most of our strategies”.
The long-term performance of the fund range “remained excellent”, but work was needed to improve the performances over the five-year period, he said, Coronation manages a meaningful share of assets in the local pension fund industry and is one of the country’s leading managers of long-term retail assets.
It also manages R68bn in its global strategies on behalf of several leading international retirement funds, endowments and family offices. Coronation’s local institutional business recorded net outflows equal to 4.3 percent of its opening balance, in line with that of the prior comparable period.
Pillay said there had been a steady net outflow in the overall local institutional market for about ten years, but this had been impacted more recently by the weak economy, where companies were not hiring as many new staff, there were more resignations and early retirements, and more people were accessing their retirement savings earlier.
“We believe the introduction of in-fund preservation could be positive for renewed growth in the pension fund market in the next five to 10 years,” he said.
Pillay said Coronation had achieved “a reasonable outcome” in terms of net outflows from their global strategies (equal to 2.4percent of its opening AUM) given, among other things, the material shift from active to passive strategies.
The institutional business manages R346bn (September 2018) on behalf of South African institutions and a growing number of global clients.