Coronation’s profits up 16.6% despite pandemic
CAPE TOWN - CORONATION Fund Managers lifted its final dividend 16.5 percent to 205 cents a share in the year to September 30, despite global markets experiencing elevated levels of risk because of the Covid-19 pandemic.
Coronation shares were up 4.37 percent to R46.68 yesterday morning, before closing at 43.60. Revenue increased 10.7 percent to R3.64 billion.
Headline earnings per share increased 16.6 percent to 398.5c per share.
Chief executive Anton Pillay yesterday described the performance as “excellent” and a continuation of improving results since 2018. The figures spoke to the success of the group’s long-term investment approach in assets that were initially perceived to be undervalued, locally and globally, he said.
Fund management earnings, which measures operating performance, excluding fair value gains and losses, and related foreign exchange, on investment securities, increased 14.2 percent to 383.1c a share.
Gross dividends were up 12.3 percent to 383c a share.
Pillay said risk in global markets remain elevated, as it was unknown how the Covid-19 pandemic would play out, while geopolitical tensions continue, such as the escalation of the trade stand-off between the US and China, and continuing uncertainties around Brexit. In South Africa, where it became clear from last month’s Medium-Term Budget Policy Statement that economic conditions were deteriorating, and in spite of commitments by the National Treasury to retain fiscal sustainability, the execution risks of these commitments remained high, he said. These uncertainties would likely weigh on the economy and investor sentiment, he said.
Total operating expenses were up 8.6 percent compared with last year. Fixed costs were up 12.8 percent, reflecting investment in technology and information systems. Excluding these, operating expenses were largely in line with inflation.
Over the 12-month period, the key asset classes in the client portfolios were in positive territory, although domestic asset returns remained depressed.
The FTSE/JSE All Share Index delivered 2 percent, and the All Bond Index returned 3.6 percent, while the MSCI All Country World Index and MSCI Emerging Markets Index returned 22.3 percent and 22.4 percent in rands, respectively.
Coronation’s closing assets under management (AUM) at September 30 were flat at R569bn (September 2019: R571bn), reflecting the positive performance across its funds and strategies, and offsetting the impact of net client outflows. Net client outflows were to be expected when economic conditions were tough and investor sentiment was negative, the directors said.
The group operated efficiently through lockdown and did not retrench or furlough employees. About 75 percent of employees continued to work remotely.
In the institutional business, which manages R330bn of assets on behalf of South African and global institutions and a meaningful share of assets in the local retirement fund industry, net outflows were in line with estimates of those experienced by the South African asset management industry, which Coronation viewed as a good outcome given the economic challenges facing the savings industry.
Outflows were expected to continue to be impacted by ongoing shrinkage in the local savings pool, which was exacerbated by financially distressed employers having to retrench employees or reduce their remuneration.
The AUM of retail assets recovered strongly in the second half and the retail fund range delivered good relative performance. Net outflows of 5.6 percent of the opening balance (September 2019: 5.4 percent) were experienced.