Tax dispute tanks Coronation earnings

Coronation CEO Anton Pillay

Coronation Fund Managers saw a 97% decrease in its basic and headline earnings per share as a result of the tax ruling against the company.

In its financial results for the interim period ended 31 March 2023, Coronation said its basic and headline earnings per share decreased from 199.1 cents per share to 6.2 cents per share.

The company ascribes this to “the impact of the latest tax ruling by the SCA on our half-year results”.

Earlier this year, the Supreme Court of Appeal ruled against Coronation in a highly complex tax dispute with the South African Revenue Service (SARS).

Coronation explained that, before the SCA ruling, a contingent liability was disclosed as a possible obligation existed at that point.

The ruling by the SCA is considered an obligating event, and, as such, Coronation has a present obligation to pay the additional taxes and interest.

The total obligation payable to SARS includes all years of assessments from 2012 to 31 March 2023 and amounts to R716 million.

The tax payable portion of the total obligation due is disclosed in the tax liability, and the interest payable has been disclosed in trade and other payables.

In April, Coronation warned that it had swung into a loss for its half-year to end-March, due to the loss of this legal battle.

Following the ruling, the company’s share price dropped 10% when it informed investors that it would likely suspend interim dividends.

Coronation followed through on this decision, and its latest results announced that the company would not be paying an interim dividend.

This aligns with the company’s dividend policy, which states that “dividend payouts depend on our after-tax cash profits”.

Coronation’s profits before tax dropped by 8% in this period, but its profits for the period declined by 97%.

However, despite the prevailing headwinds, Coronation’s closing AUM for the period was up 9% at R623 billion. In addition, over 95% of the company’s portfolios outperformed their benchmarks since inception.