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2023-05-23 at 14:38 #405833Nat QuinnKeymaster
Coronation Fund Managers has released its interim results for the six months ended 31 March 2023, expressing concern over South Africa’s lackadaisical response to load shedding.
The group said that the period under review remained incredibly challenging, with central banks in many countries implementing major interest rate increases from previous historical lows.
In terms of South Africa, the group said that the performance of the South African economy is incredibly discouraging.
“The long-term fundamentals continue to deteriorate, and little concrete action is being taken to drive meaningful change,” it said.
Its largest concern revolves around electricity generation in South Africa.
Although the recent regulatory changes that allow for private sector generation should help with load shedding in the medium term, the group expressed concern over the long-term plans to address the nation’s energy needs.
It said that the current long-term plan does not account for the scale of new baseload capacity nor the investment required for transmission infrastructure.
“If these investments are not sufficiently prioritised, then the system will be unable to support renewables at the scale currently envisaged. The timelines required mean that if these decisions are not taken now, we will continue to face unacceptable energy deficits in the decades ahead,” it said.
Despite the difficult operating environment, the group said that its local portfolios have remained resilient, with closing Assets Under Management (AUM) for the period up 9% to R623 billion, up from R574 billion for the six months from 30 September 2022.
However, other financial data has highlighted some of the group’s major challenges.
Total fixed expenses increased by 11% from the previous period, mainly driven by the normalisation of the cost base of the Covid pandemic. The weakening of the rand/dollar exchange rate by 15% also affected expenses, especially in regard to technology costs.
Earnings per share, headlines earnings per share and diluted headline earnings per share of 6.2 cents were reported for the period under review, a 97% decline from the 199.1 cents per share in the prior corresponding period.
The group added that its legal battle with the South African Revenue Service (SARS) also affected its dividend payouts.
In February, as reported by News24, the Supreme Court of Appeal (SCA) ordered Coronation to pay a large tax bill to SARS over a tax dispute relating to the group’s business activities in Ireland.
Although Coronation believes that the SCA erred in its ruling, it said that it would not pay an interim dividend for the period under review – in line with its dividend policy which states that dividend payouts are dependent on after-tax cash profits
However, the group stressed that the ongoing tax dispute with SARS will not affect its long-term sustainability.
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