Coronation bounces back after massive SARS bill

Coronation CEO Anton Pillay

Coronation’s performance has returned to 2022 levels following a hefty SARS bill in 2023 that affected its results in the past financial year.

The asset manager released its interim results for the period through March 2024 today, which revealed that revenue increased by 4.3% to R1.89 billion from R1.82 billion in the prior corresponding period in 2023.

Despite this modest increase in revenue, the firm reported a 3,086% rise in profit and a 3,134% increase in basic earnings per share.

Basic earnings and headline earnings per share increased to 200.5 cents per share from 6.2 cents per share in 2023.

Fund management earnings – used by management to measure operating financial performance – increased to 185.8 cents per share from a loss of 13.0 cents per share in 2023.

Despite representing a massive rise from 2023 levels, these results are only moderately higher than the firm’s 2022 performance.

In its 2022 interim results, the firm reported a profit of R697 million, compared to R701 million in 2024.

Coronation reported basic earnings per share of 199.1 cents in 2022, compared to 200.5 cents in 2024.

This is because the asset manager was subject to a hefty bill from SARS in 2023, which saw it pay the taxman R783 million.

This provided a low base for the 2024 results, during which the taxation on shareholder profits was only R249 million.

In 2022, the asset manager listed a SARS review as one of its contingent liabilities.

“The group has been the subject of a review on a matter of principle relating to its international operations and assessed for the 2012 to 2017 financial periods, to which management strongly disagrees and has objected,” the firm said. 

The matter was heard in the Western Cape Tax Court, which ruled in Coronation’s favour on 17 September 2021. SARS subsequently appealed this judgment. 

“An outflow is not considered probable when the matter is ultimately adjudicated in the Supreme Court of Appeal (SCA),” Coronation said at the time.

In 2023, the SCA handed down its judgment, in which it upheld SARS’ appeal and ordered Coronation South Africa to pay additional taxes in respect of profits earned by its international operations, together with interest and costs. 

The SCA dismissed SARS’ claim for penalties.

Coronation applied to the Constitutional Court for leave to appeal the SCA judgement, for which judgement is still being awaited.

However, the SCA’s ruling was considered an obligating event and therefore, Coronation had a present obligation to pay the additional taxes and interest, which includes years of assessments from 2012 to 31 March 2024.

This is why Coronation’s total obligation payable to SARS in 2023 for this matter amounted to R716 million, contributing to its hefty bill that year.

Coronation declared an interim dividend of 185 cents per share for the period ended 31 March 2024, which is good news for shareholders who did not receive a dividend in the prior corresponding period.