Coronation Fund Managers Limited · JSE:CML
Coronation Fund Managers — FY2004 Earnings Presentation
60 slides from Coronation Fund Managers's earnings presentation, 2004
Slide 1: Reviewed financial results for the first full year of listing
Reviewed financial results for the first full year of listing
Slide 2: Agenda
Agenda • Summary of results • Coronation Fund Managers • Business reviews: • SA institutional • SA retail • International • Financials • Strategy and positioning • Transformation • Prospects
Slide 3: Summary
Summary
Slide 4: Operating Environment
Operating Environment • Favourable operating environment: • Sound global economy • Significantly above average domestic equity return of 36% • A cumulative decline of 6% in domestic interest rates • Inflation which continued its downward cycle • A persistently strong rand (strengthening by 7.21% to
Slide 5: Market Movements
Market Movements 'BS(J203,E,100), FTSE/JSE FINANCIALS based to 100 at the start, !BS(J211,E,100) Daily 2003/09/30-2004/09/30 Oct | Nov | Dec Jan [| Feb [| Mar | Apr [ May [| Jun [| Jul [ Aug | Sep [| 0 2003 2004 = '!BS(J203,E,100) (131.77) IBS(JO80,E,100) (144.37) om IBS(J211,E,100) (141.99) om
Slide 6: Assets under Management
Assets under Management 70000 63,759 59,978 60000 53,697 50000 48,114 43,902 40000 30000 28,189 25,920 23,935 20000 12,267 10000 7,520 2,800 803 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 7: Composition of Assets under Management
Composition of Assets under Management Business split between Institutional, Retail & International 2004 2003 ZAR 6,3 ZAR 7,4 (10%) (14%) ZAR 7,8 ZAR 5,5 (12%) (10%) ZAR 40,8 (76%) ZAR 49,6 (78%) Institutional Retail International
Slide 8: Composition of Assets under Management
Composition of Assets under Management Business split between asset classes 2004 2003 ZAR 6,7 ZAR 6,5 ZAR 7,4 (11%) ZAR 12,0 (12%) (14%) (18%) ZAR 45,0 (71%) ZAR 39,8 (74%) Fixed Interest Equity International
Slide 9: Composition of Assets under Management
Composition of Assets under Management Business split between business unit 2004 2003 ZAR 7,7 ZAR 6,6 (12%) (12%) ZAR 23,7 ZAR 6,4 ZAR 28,4 ZAR 6,3 (44%) (10%) (45%) (12%) ZAR2,2 (3%) ZAR 1,4 (3%) ZAR 7,9 ZAR 5,2 (12%) (10%) ZAR 11,1 ZAR 10,5 (18%) (19%) Segregated Pooled Multi-Managers Private Clie
Slide 10: Summary of Results
Summary of Results Headline Earnings R129.5 million Headline EPS 33.9 cents Dividend 25 cents
Slide 11: Summary
Summary • Solid performance • SA business – good local performance due to: • Strong recurring income • Better than expected performance fees • Superior local investment returns • International business – satisfactory results in light of: • Strengthening rand • Difficult market environment - hedge an
Slide 12: Coronation Fund Managers
Coronation Fund Managers
Slide 13: Corporate Structure
Corporate Structure Coronation Fund Managers Limited Coronation Investment Management (Pty) Limited 100% 100% 100% 100% Coronation Coronation Coronation Life Asset Management Assurance CFM Limited Management Company Company Limited (Pty) Limited Limited 26% 49% 100% 100% Kagiso Asset Coronation Fund
Slide 14: Shareholding
Shareholding As at 30 September 2004 Other RMB Allan Gray* CIT (<5% ea) 22% 55% Coronation Fund 5% Managers 18% * On behalf of clients
Slide 15: Review of SA Institutional Business
Review of SA Institutional Business
Slide 16: SA Institutional: Industry
SA Institutional Industry • SA institutional industry characterised by: • Net outflows • Lack of growth in total asset pool • Continuing emphasis on move from traditional balanced mandates to specialist mandates
Slide 17: SA Institutional
SA Institutional • Assets under management: R49.6 billion • Number of institutional clients: 282 • Exceptional investment performance: • SA balanced portfolios – Ranked 2nd over one year in Alexander Forbes SA Large Manager Watch survey (30 September 2004) • Global balanced portfolios – Ranked 2nd f
Slide 18: SA Institutional Performance
SA Institutional Performance Global Large Manager Watch YTD ended 30 September 2004 Prudential 16.36% OMAM 15.75% Coronation 15.66% RMBAM 15.42% African Harvest 14.91% Median 14.83% Investec 14.13% Sanlam 14.13% Stanlib 13.62% Oasis 13.59% Metropolitan 13.29% Allan Gray 11.62% Source: Alexander Forb
Slide 19: SA Institutional Performance
SA Institutional Performance Global Large Manager Watch 1 year ended 30 September 2004 Prudential 32.57% RMBAM 31.99% OMAM 31.85% Coronation 30.38% Sanlam 30.10% Median 29.80% Investec 29.20% African Harvest 28.92% Stanlib 28.85% Oasis 28.11% Metropolitan 25.68% Allan Gray 23.98% Source: Alexander F
Slide 20: SA Institutional Performance
SA Institutional Performance SA Large Manager Watch YTD ended 30 September 2004 Prudential 18.60% Coronation 17.97% OMAM 17.50% African Harvest 17.45% RMBAM 17.22% Median 16.47% Sanlam 16.37% Investec 16.28% Stanlib 16.07% Oasis 15.82% Metropolitan 15.06% Allan Gray 14.22% Source: Alexander Forbes
Slide 21: SA Institutional Performance
SA Institutional Performance SA Large Manager Watch 1 year ended 30 September 2004 Prudential 36.76% Coronation 35.02% OMAM 34.57% RMBAM 34.33% Sanlam 34.03% Investec 33.25% Median 33.14% Stanlib 32.93% African Harvest 32.91% Oasis 31.97% Metropolitan 29.33% Allan Gray 28.78% Source: Alexander Forbe
Slide 22: SA Institutional
SA Institutional • Coronation Fund Managers: • 11-year track record of superior investment returns • Acknowledged in industry as managers of equity, absolute and now fixed interest portfolios • Focused on clients - a team of client fund managers who understand client needs • Exciting growth area: Pa
Slide 23: Review of SA Retail Business
Review of SA Retail Business
Slide 24: SA Retail: Industry
SA Retail Industry • The collective investments industry: • Grew by 39% fuelled by strong domestic equity performance • Net new inflows into absolute, property, managed fixed interest and money market funds • Marked improvement in the flow of assets into equity and managed funds • Net outflows from
Slide 25: SA Retail
SA Retail • Assets under management: • Including international R8.7 billion • Excluding international R7.8 billion • Business development: • Market share improved to 6% • Share of net flows in Q4 of 11% • Achieved most new business in fixed income & real estate
Slide 26: SA Retail
SA Retail • Performance: • 16th consecutive 1st or 2nd place in Plexus Survey • All managed funds delivered over key 36 month period • International, Smaller Companies & relative equity performance only (minor) detractors “Fund managers need to be brutally honest: alpha is 98 percent hard work and t
Slide 27: SA Retail: market share, total assets
SA Retail Industry: market share – total assets Ranking based on all assets (R303.3bn of total industry assets; 9/04) 1 Stanlib R51.9bn 2 ABSA R38.6bn 3 Sanlam R28.4bn 4 Investec R27.5bn 5 M-Cubed R26.4bn 6 Old Mutual R23.3bn 7 Allan Gray R17.1bn 8 Investment Solutions R13.8bn 9 Nedbank R11.0bn 10 P
Slide 28: SA Retail: market share, long-term single managers
SA Retail Industry: market share – long-term single managers Ranking excl. cash, multi-managed assets, FOF, white-labels (R119.2bn; 10/04) 1 Allan Gray (14%) R17.2bn 2 Investec (14%) R16.4bn 3 Old Mutual (13%) R15.6bn 4 Stanlib (13%) R15.5bn 5 Coronation (6%) R7.7bn 6 Sanlam (6%) R7.6bn 7 Polaris (4
Slide 29: SA Retail: breakdown by product type, equity
SA Retail Industry – breakdown by product type Market neutral EQUITY Prefs 1. Old Mutual 20.4% Property Managed 4%5% 2. Allan Gray 12.4% 5% 17% 3. Investec 12.0% Int’l 13% 4. Polaris 9.9% 5. Stanlib 9.3% 6. Sage 5.1% 16% Fixed 40% 7. Coronation 5.0% Income Equity Source: ACI Statistics; University o
Slide 30: SA Retail: breakdown by product type, managed
SA Retail Industry – breakdown by product type Market neutral MANAGED Prefs 1. Allan Gray 43.1% Property Managed 4%5% 2. Coronation 8.5% 5% 17% 3. Investec 8.4% Int’l 13% 4. Old Mutual 5.5% 5. Stanlib 5.2% 16% Fixed 40% Income Equity Source: ACI Statistics; University of Pretoria Unit Trusts Survey
Slide 31: SA Retail: breakdown by product type, fixed interest
SA Retail Industry – breakdown by product type Market neutral FIXED INTEREST Prefs 1. Stanlib 30.9% Property Managed 4%5% 2. Investec 23.1% 5% 17% 3. Old Mutual 10.0% Int’l 13% 4. Coronation 6.7% 5. RMB 5.8% 16% Fixed 40% Income Equity Source: ACI Statistics; University of Pretoria Unit Trusts Surve
Slide 32: SA Retail: breakdown by product type, international
SA Retail Industry – breakdown by product type Market neutral INTERNATIONAL Prefs 1. Stanlib 19.3% Property Managed 4%5% 2. Old Mutual 16.2% 5% 17% 3. Investec 15.3% Int’l 13% 4. Sanlam 14.8% 5. Coronation 9.4% 16% Fixed 40% Income Equity Source: ACI Statistics; University of Pretoria Unit Trusts Su
Slide 33: SA Retail: real estate, market neutral, preference shares
SA Retail Industry – breakdown by product type Market neutral REAL ESTATE Prefs 1. Marriott 58.8% Property Managed 4%5% 2. Stanlib 18.2% 5% 17% 3. Coronation 11.7% Int’l 13% MARKET NEUTRAL 1. Investec 38.3% 16% 2. Allan Gray 30.7% Fixed 40% Income PREFERENCE SHARES Equity 1. ABSA 75% 2. Sanlam 25% S
Slide 34: Review of International Business
Review of International Business
Slide 35: International: Industry
International Industry • Hedge fund industry continues to experience rapid growth in institutional assets: • 8 000 funds > US$1 trillion • Inflows of US$108 billion (September 2003 – June 2004)
Slide 36: International
International • Assets under management remained stable at US$1 billion • Solid investment performance • International new business encouraging
Slide 37: International: Business strategy
International • Business strategy: • Strong team • Robust investment process • Continue to make significant inroads from business development perspective • Well positioned to compete for international assets
Slide 38: Financials
Financials
Slide 39: Snap shot results
Snap shot results 2004 2003 Earnings 126,537 60,869 Headline earnings 129,507 60,925 Headline EPS Normal 33.9 15.9 Diluted 33.5 15.9 NAV per share 59.0 39.3
Slide 40: Snap shot results
Snap shot results 2004 2003 ROE 67.3% 48.7% Cost to income 52.4% 52.8% Segment contribution SA 84.0% 63.0% International 16.0% 37.0% Annuity income as % of operating income 67.7% 65.8%
Slide 41: Financial Summary
Financial Summary 2004 Revenue R389,0m Performance fees R107,2m Management Fees R263,0m Others R 19,0m Operating Expenses R219,6m PBT R169,4m Tax R 43,0m PAT R126,5m
Slide 42: Competitor Analysis: Assets under management
Competitor Analysis Assets under management 350 300 300 289 250 238 224 226 210 Rand Billion 200 153 154 150 150 137 100 64 54 42 41 50 - Competitor A Competitor B Competitor C Conpetitor D Competitor E Coronation Competitor F 2003 2004
Slide 43: Competitor Analysis: Revenue
Competitor Analysis Revenue 1,400 1,254 1,200 1,000 924 Rand Million 768 800 600 542 560 389 400 200 76 - Competitor A Competitor B Competitor C Competitor D Competitor E Coronation Competitor F
Slide 44: Competitor Analysis: Revenue as % of AUM
Competitor Analysis Revenue as % of AUM 0.70% 0.61% 0.60% 0.51% 0.50% Percentage 0.40% 0.34% 0.37% 0.35% 0.32% 0.30% 0.19% 0.20% 0.10% 0.00% Competitor A Competitor B Competitor C Competitor D Competitor E Coronation Competitor F
Slide 45: Competitor Analysis: Operating Profit as % of AUM
Competitor Analysis Operating Profit as % of AUM 0.25% 0.20% 0.20% Percentage 0.15% 0.12% 0.10% 0.10% 0.08% 0.06% 0.06% 0.05% 0.03% 0.00% Competitor A Competitor B Competitor C Competitor D Competitor E Coronation Competitor F
Slide 46: Competitor Analysis: Cost-to-Income Ratio
Competitor Analysis Cost-to-Income Ratio 90% 80% 77% 72% 74% 70% 67% 61% 60% 55% 52% Percentage 50% 40% 30% 20% 10% 0% Competitor A Competitor B Competitor C Competitor D Competitor E Coronation Competitor F
Slide 47: Average Fixed Fee
Average Fixed Fee 0.99% 0.90% 0.73% 0.74% 0.47% 0.45% 0.36% 0.34% 2003 2004 International Institutional Retail Total
Slide 48: Funds subject to performance fees as a % of AUM
Funds subject to performance fees as a % of AUM Institutional 44% Retail 29% International 64% Total 44%
Slide 49: Cost base – per month
Cost base – per month 2004 2003 International (USD) 441,000 395,000 SA (ZAR) 9,140,000 9,028,000 Total (ZAR) 11,110,000 10,970,000
Slide 50: Group Balance Sheet
Group Balance Sheet Reviewed Audited as at as at 30 Sept 2004 30 Sept 2003 R'000 Peeleey Ordinary share capital 338 38 Preference share capital 1 it Equipment 5 684 5 889 Share premium 93 561 93 561 Investment in associates 3 706 7563 § Non-distributable reserve (9 242) (3 916) Financial investments
Slide 51: Strategy and Positioning
Strategy and Positioning
Slide 52: Strategy and Positioning
Strategy and Positioning Focus At the time of listing, we stated that “we will remain focused on the core competencies of providing consistent superior investment performance, innovative products and exceptional client service, and to retain a high return on capital and maintain the low level of fix
Slide 53: Strategy and Positioning
Strategy and Positioning • 2nd largest independent fund manager in South Africa (independent of a bank or life company) • A business of substance and quality • Sustainable, independent and profitable • Optimal blend of a small entrepreneurial business and professional medium-sized operation Putting
Slide 54: Staying ahead of the competition
Staying ahead of the competition Which structural factors have helped your company to contain the fall in profits in the last two years and which are likely to boost your profits in the next two years? 0 20 40 60 80 CFM Adopting a 'boutique style' type operating model √ Better quality of in-house re
Slide 55: Transformation
Transformation
Slide 56: Transformation: Progress and Plans
Transformation Progress and Plans • We recognise that broad-based sustainable transformation is the route to greater business success and positive social impact • We have embraced transformation at all levels of our business where we seek equality across lines of race, culture and gender
Slide 57: Transformation: Progress and Plans
Transformation Progress and Plans • Our key focus areas are to: • Continue to employ talented black individuals who will further enrich the diversity of our staff complement – currently our staff composition is 44% black • Procure services from suppliers who are committed to transformation – 41% of
Slide 58: Prospects
Prospects
Slide 59: Prospects
Prospects • Rank high as one of South Africa’s most successful, most innovative fund management companies • Consistently strong investment performance track record • Exceptional client service • Extraordinary team of people, locally and offshore • Undiluted focus on fund management
Slide 60: Questions
Questions
Coronation Fund Managers — FY2004 Earnings Presentation on 6ix