Coronation Fund Managers fund management earnings per share (FMEPS) are expected to decline by between 110% and 120% for the six months to March 31, following a large provision it was forced to make against a tax case with the SA Revenue Service (Sars).
The group, one of the largest asset management firms in South Africa, will also not be declaring an interim dividend due to the material financial impact of the provision, it said in a trading statement on Friday.
“The company is disappointed with the Supreme Court of Appeal (SCA) judgment in favour of Sars, which overturned the decision of the Western Cape Tax Court. The company applied to the Constitutional Court for leave to appeal the SCA judgement as it is firmly of the view that the SCA erred in its ruling. Should the Constitutional Court grant leave to the parties for the matter to be heard, it is likely to be heard in the 2024 financial year,” Coronation’s directors said.
“Notwithstanding the decision to apply for leave to appeal, the company is required to raise a provision as a consequence of the SCA judgment.
"The provision is based on all financial years from 2012 to 2022 being impacted by the application of the SCA judgment and is estimated to be between R800 million and R900m,” the group said in an earlier statement.
FMEPS for the six months to March 31, 2022 was 214.8 cents per share, and now was expected to decrease between 110% to 120% to a fund management loss per share of between 21.5 to 43.0 cents.
Fund management earnings are usually used by its management to measure operating financial performance, being profit excluding the net mark-to-market impact of unrealised fair value gains and losses, and related foreign exchange, on investment securities held.
The impact of the net mark-to-market of fair value gains and related foreign exchange was 19.1 cents per share, compared to net fair value losses of 15.6 cents in the prior period.
Earnings per share, headline earnings a share and diluted headline earnings a share for the prior period were 199.1 cents, and were expected to fall between 101% to 111% (by 201.1 to 221.0 cents), resulting in a loss per share of between 2.0 to 21.9 cents.
Coronation’s assets under management were R623 billion as at March 31, 2023.
The dispute with Sars related to whether profits of Coronation’s business in Ireland, Coronation Global Fund Managers (CGFM), should be included in the taxable income of its South African holding company. If the primary operations of CGFM were conducted in Ireland, a tax exemption applied, but Sars found this was not the case and that the exemption did not apply.
Coronation’s share price fell 0.6% to R29.31 Friday morning, some 30.1% below the R41.96 that the share traded at on the same day a year ago.
BUSINESS REPORT