Coronation is rocking after big win

Coronation is in full recovery following its legal battle with the South African Revenue Service (SARS), with earnings up significantly and a boost in its assets under management.

Coronation released its results for the year through September 2024, which showed a strong performance.

The asset manager’s revenue is up 7% to R3.91 billion, while profit for the year is up 245% to R2.21 billion. This includes the impact of the SARS court win.

For the financial year under review, fund management earnings per share were up 9% year on year at 402.9 cents, after excluding the impact of the now-concluded SARS matter.

Coronation Investment Management recently secured a significant legal victory against the taxman in a long-standing tax dispute. 

In June this year, the Constitutional Court overturned a previous Supreme Court of Appeal ruling, confirming that Coronation’s Irish subsidiary qualifies as a Foreign Business Establishment under Section 9D of the Income Tax Act. 

This judgment exempts the subsidiary’s income from South African taxation and spared Coronation a tax bill of nearly R800 million​.

This significant victory has been reflected in Coronation’s results for its 2024 financial year. When the matter was still under litigation, the company raised a provision to cover potential penalties and other claims if it lost the case at the Constitutional Court.

The successful outcome of the court case and the reversal of the provision raised in the year ended 30 September 2023 skyrocketed Coronation’s earnings.

The asset manager’s total assets under management (AUM) increased by 11% to R667 billion.

Coronation attributed this growth to strong market returns and continued outperformance. The company’s average AUM increased by 2% to R631 billion.

Coronation explained that global markets delivered solid returns in 2024, as financial markets absorbed many concerning geopolitical tensions while also responding positively to encouraging developments in inflation, economic growth and interest rate outlooks. 

In South Africa, asset returns have been robust, fuelled by growing optimism that the new Government of National Unity will deliver much-needed reforms and unlock economic growth.

Coronation said its portfolios performed well amid the market volatility, with clients benefitting from the value generated by our active asset allocation and rigorous research approach. 

For the year under review, 92% of Corontion’s funds across the business have outperformed their benchmarks since inception. 

“Long-term outperformance in our South African portfolios, in particular, continues to be outstanding at 97%, with many ranking exceptionally high in industry surveys,” the company said. 

“Our globally integrated approach to managing offshore allocations in our Regulation 28-compliant funds has been material to our ability to unlock value for our clients.” 

“Our global portfolios have recently delivered promising performance, and we are encouraged by the renewed interest in our Africa Frontiers Strategy after a decade of muted investor enthusiasm for this asset class.”

However, Coronation’s total operating expenses, excluding the impact of the SARS tax matter, have increased by 8% year-on-year, which it said reflects the rising cost of doing business in South Africa.

“We remain acutely aware of the competitive, skills-constrained environment in which we operate and have continued to invest meaningfully in the business to maintain our market-leading position.” 

“Key areas of investment include strengthening our local and global investment capabilities, enhancing client service systems, optimising information and technology systems and data management, and upholding rigorous compliance standards in response to a demanding global regulatory landscape.”

“This consistent investment in our people and systems was demonstrated by our ability to efficiently and timeously manage the heightened level of withdrawals that accompanied the roll-out of the Two-Pot retirement system on 1 September 2024.”

Coronation’s net outflows also moderated to 8.1% of average AUM during the reporting period. 

However, the asset manager said the South African savings industry remains cash-flow negative, and, as a major industry player, Coronation is likely to continue experiencing outflows reflective of the broader environment. 

“We anticipate this trend will persist as long as a weak economy and the high unemployment rate continue to limit people’s ability to save and invest.”

Coronation upped its gross total dividend per share by 243% to 566 cents, up from 165 cents the previous year.