Coronation’s revenue dips as fees weigh

CORONATION Fund Managers posted lower revenue in the half year to March as a dip in the levels of performance fees weighed on results in the period under review compared with the comparative period last year.

Revenue dropped by 6 percent to R2.17 billion in the six months to March from R2.3bn in the same period last year. Diluted headline earnings a share dipped by 10 percent to 246.7 cents from to 275.4c in the previous comparative period last year.

Bjorn Zietsman, an analyst with Avior Capital Markets, was bullish about Coronation’s prospects in its international business.

He noted yesterday that the decline in revenue and earnings were a reflection that the performance fees came from a high base. But he added that the company’s high variable cost base should result in increased earnings if the company could continue to grow assets under management and, consequently, revenue.

“We don’t believe that Coronation has lost market share, but the industry has shown a decline. We believe that Coronation will continue to attract retail and international flows, and grow its total assets under management,” Zietsman said.

Despite the declining earnings, South Africa’s top trust fund management company rewarded its shareholders when it declared a gross divided of 246c per share.

“We endeavour to distribute at least 75 percent of after-tax cash profit,” the company said yesterday.

Coronation beefed up its funds under management by 8 percent to R636bn in the period under review.

“Our financial results for the period serve as a reminder that the earnings stream of a fund manager is cyclical and volatile,” the company said. The company recorded net inflows of R8.01bn. Net outflows of R560 million were recorded.

The international division attracted net inflows of R10.28bn, mainly into the emerging market division. Net inflows in the local segment of the business were attributable to the maturity of the domestic retirement fund industry and the closure of its equity and multi-asset funds to new institutional clients.

“Notwithstanding the fact that the long-term investment performance across our fund range remains excellent, we have cautioned shareholders for some time that the elevated levels of markets, as well as volatility in short-term alpha, can have a significant impact on the earnings of our company,” it said.

Over the period, developed markets once again outperformed emerging markets (3.6 percent for the MSCI world index versus minus 2.3 percent for the MSCI emerging markets index, both in US dollar terms), while the FTSE/JSE all share index returned 7.3 percent (down 0.3 percent in US dollar terms).

Coronation shares on the JSE rose 2.84 percent to close at R92.04.