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SYGNIA LIMITED - Abridged pre-listing statement

Release Date: 01/10/2015 07:30
Code(s): SYG     PDF:  
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SYGNIA LIMITED

(formerly Sygnia Investment Holdings No 2 Proprietary Limited) (Incorporated in the Republic of South Africa) (Registration number 2007/025416/06) Share code on the JSE: SYG ISIN: ZAE000208815 ("Sygnia" or "the Company" or 'the Group') ABRIDGED PRE-LISTING STATEMENT
This abridged pre-listing statement ('Abridged Pre-Listing Statement') relates to:
- an offer for subscription by Sygnia (R237,256,606) and an offer for sale by an existing shareholder (R25,032,000) to eligible investors of up to 31,224,834 Sygnia ordinary shares ('Placing Shares') at a price of R8.40 per Placing Share ('Private Placing Price') for an aggregate amount of R262,288,606 ('Private Placing'); and
- the subsequent listing by way of private placing of up to 137,178,000 Sygnia ordinary shares on the Main Board in the Financial Services sector of the JSE Limited ('JSE') under the abbreviated name 'SYGNIA' and having the JSE share code 'SYG', with effect from the commencement of business on Wednesday, 14 October 2015 ('Listing').
This Abridged Pre-Listing Statement is not an invitation to the public to subscribe for, or an offer to the public to purchase, Sygnia ordinary shares, but is issued in compliance with the JSE Listings Requirements ('Listings Requirements') for the purpose of giving information to the public with regard to Sygnia. Subscriptions in terms of the Private Placing are only allowed for a minimum amount of R1,000,000 per single addressee acting as principal except in the case of persons falling within one of the specified categories listed in section 96(1)(a) of the Companies Act, No.71 of 2008.
This Abridged Pre-Listing Statement contains the salient features of the Company, the Private Placing and the Listing and as such is not intended to be comprehensive. For a full appreciation of the Company, the Private Placing and the Listing, the pre-listing statement published on Thursday, 1 October 2015 ('Pre- Listing Statement') should be read in its entirety. All words and terms in this Abridged Pre-Listing Statement have meanings as defined in the Pre-Listing Statement. 1. INTRODUCTION TO SYGNIA
Sygnia is a specialist financial services group headquartered in South Africa focusing on the provision of investment management and administration solutions to institutional and retail clients predominantly located in South Africa.
The main services provided by Sygnia include multi-manager investment solutions, index-tracking investment solutions, customised/bespoke investment strategy management, transition management and investment administration/platform services. The primary institutional clients span both the private and public sector and include retirement funds, umbrella funds, life insurers, third party multi- managers, endowments and other special purpose funds. The primary retail clients include individual members and beneficiaries of retirement funds, as well as the wider individual savings market. Sygnia's principal geographic focus is South Africa, where it has been operating in its current form since November 2006. Sygnia managed and administered assets of R137 billion as at 30 June 2015. As at 30 June 2015 Sygnia employed 114 people, including actuaries, chartered accountants, lawyers and investment professionals. The founding shareholders of the Group have worked together since 2003. The core management team has worked together for 10 years. 2. KEY COMPETITIVE ADVANTAGES
The key determinants of Sygnia's success, and its main competitive advantages, include:
- The management team has a wealth of experience in the field of asset management and retirement fund consulting, and a deep understanding of the institutional and retail markets in South Africa;
- The management team has a successful track record of organically building entrepreneurial businesses and creating shareholder value;
- Sygnia's proprietary multi-manager administration systems are market leaders in South Africa and make Sygnia's services highly scalable;
- The Group has built up a strong reputation for offering client service excellence, strong performance, transparency and fairness of costs and charges. The culture of putting the customer first is ingrained in the manner in which Sygnia operates;
- The Group has long-standing relationships with many leading employee benefits consulting, investment consulting and financial advisory businesses in South Africa. This will support its future institutional and retail growth;
- Sygnia is well-positioned to take advantage of the changing regulatory dynamics;
- Sygnia has a reputation for innovation and being a 'market disruptor' within the financial services industry in South Africa. The desire to innovate through thoroughly-considered, unconventional and contrarian business strategies continues to drive strategy; and
- The Group has a growing revenue base, whilst being a highly cash generative business. 3. GROWTH STRATEGIES
Sygnia has identified multiple areas of future growth and expansion, all of which are able to be pursued due to the highly scalable operational and regulatory infrastructures that have been put in place over the past seven years. The core areas of growth are: Institutional multi-manager business
Sygnia's investment performance has been consistently strong relative to its peers. Sygnia has made strong in-roads into the institutional client bases of small to medium sized employee benefits consulting companies in South Africa. It has not, however, made any in-roads into the client bases of certain large employee benefits consulting companies that support multi-management. Those client bases present a significant business opportunity for Sygnia going forward, as Sygnia is able to offer an attractive alternative to the existing multi-management arrangements.
Institutional investment administration/platform business
Sygnia's investment administration is regarded as a market leader. The Group is thus uniquely placed to take advantage of the growing demand for platform services among large institutional investors, including parastatals, municipalities and umbrella funds. Index-tracking investment management
Sygnia has a 12-year performance track record in managing index-tracking funds. There is a growing demand for low cost products, such as index-tracking funds, among both institutional and retail investors in South Africa as both stand-alone solutions as well as part of a balanced fund solution. Market penetration of index-tracking funds is currently extremely low, however this is likely to change rapidly given that these funds enjoy the benefits of low cost and the support of the regulators. Funds of South African hedge funds
Sygnia has a 12-year performance track record in successfully managing funds of South African hedge funds. The growth in this product category has been slow, impeded by the non-supportive regulatory environment. However, given the recent changes in regulation declaring hedge funds as Collective Investment Schemes under Government Notice 141, which will allow certain hedge funds to be marketed to the retail public, as well as the changing investment environment dynamics becoming more supportive of capital preservation type strategies, the profile and attractiveness of hedge fund investments is expected to grow, with most investors preferring to access hedge funds through a fund of hedge funds. Retail multi-manager business
Sygnia's multi-manager funds are enjoying growing support among the financial advisory market due to the cost-effectiveness of the proposition and strong investment performance. Sygnia's penetration of the independent financial advisory market is still relatively low and offers a significant opportunity for growth.
In addition, the proposed regulatory reforms to retail distribution means that Sygnia's traditional client base is likely to look for retail solutions in order to meet proposed regulatory requirements.
Retail investment administration/platform/LISP business
Sygnia's Linked Investment Service Provider ('LISP') platform is supported by a constantly evolving systems-platform and analytical tools. The cost-effective pricing, together with a stable systems infrastructure, means that Sygnia is becoming increasingly attractive to the direct investor, as well as to financial advisors who are looking to reposition themselves in terms of business support in light of the changing regulatory environment. Securities business
Sygnia's securities business was launched in 2014 to support Sygnia's index-tracking and other investment activities. This business aims to attract third party stockbroking clients and individual share investors.
In terms of market segment penetration, Sygnia has limited exposure to the following market segments, which all present significant growth opportunities:
- public sector institutions and funds; and
- certain large employee benefits consulting companies that support multi-management. 4. DIRECTORS
The full names, ages, qualifications, nationalities, business addresses and functions of the directors of Sygnia are set out below:
Directors Business address Function Executive
Magdalena Franciszka Wierzycka (45) 7th Floor, The Foundry, Cardiff Chief Executive Officer BBusSc (Actuarial), PhDip (Actuarial), FFA, FASSA, Street, Green Point, 8001 CFP South African/Polish
Niki Jane Giles (40) 7th Floor, The Foundry, Cardiff Financial Director CA(SA), CFA, BBusSc (Finance) Street, Green Point, 8001 South African Non-executive
Haroon Ismail Bhorat (46) Room 3.32, School of Economics Non-executive Chairman PhD (Economics), M.A (Economics), BA (Economics), Building, Middle Campus, BA HONS (Economics and History) University of Cape Town South African
Kenneth Thomas Hopkins (60) 10 Avenue Lombardie, Constantia, Independent non- CA(SA), B Com (Hons) Cape Town, 7806 executive director South African
Isiah Kaizer Moyane (43) Edcon Place, 12-16 Laub Street, Independent non- BA, LLB New Centre, Johannesburg executive director South African
Shirley Anne Zinn (54) 8 Amberfield, 50 West Road Lead independent non- BA, HDip (Education), B.Ed Hons, M.Ed, Ed.M South, Morningside, Sandton executive director (Harvard), Ed.D (Harvard) South African 5. RATIONALE FOR THE PRIVATE PLACING AND LISTING
The reasons for the Private Placing and Listing are to:
- enhance the Company's public profile, brand recognition and general public awareness in order to facilitate growth;
- strengthen the balance sheet of the Company to provide it with sufficient headroom in terms of the regulatory capital requirements and to enable the Company to pursue its organic growth strategies faster than it has been able to do to date;
- enable the Company to access capital markets, as and if required;
- enable the Company to retain key management staff by offering them access to listed ordinary shares in the Company; and
- allow the Company to pursue its systems development strategies faster.
The net proceeds from the offer for subscription are estimated to be R232,506,606, after deducting the estimated Private Placing and Listing expenses of R4,750,000. These net proceeds will be used to increase the Company's regulatory capital holdings, pursue systems development strategies, actively market Sygnia's brand and the profile of index-tracking, general research and development expenditure, augment distribution channels and facilitate geographic expansion. 6. THE PRIVATE PLACING 6.1 Particulars of the Private Placing
The Private Placing comprises an offer for subscription by Sygnia (R237,256,606) and an offer for sale by an existing shareholder (R25,032,000) to eligible investors of up to 31,224,834 Placing Shares at the Private Placing Price for a total amount of R262,288,606.
The Private Placing Price at which the Placing Shares will be offered for subscription or for sale pursuant to the Private Placing will be R8.40 per Placing Share. 6.2 Conditions to the Private Placing
In the opinion of the board of directors of Sygnia, a minimum amount of R225,501,653 comprising 26,488,292 Sygnia ordinary shares at the Private Placing Price, is required to be raised by the Private Placing in order to achieve the objectives of the Private Placing and Listing as set out in paragraph 5 above and to ensure the Company has the public shareholding required by the Listings Requirements.
The Private Placing has not been underwritten and the offer for subscription is conditional upon the minimum subscription being received that will fulfil the purpose of the Private Placing and Listing.
The Private Placing and Listing remain subject to a spread of shareholders acceptable to the JSE being attained. The Listings Requirements provide that, unless the JSE determines otherwise, public shareholders, as defined by the Listings Requirements, must hold a minimum of 20% of the ordinary shares on the day of Listing.
The Private Placing and Listing will not proceed if the JSE's shareholder spread requirements are not acceptable to the JSE, and any acceptance of the Private Placing will not take effect and no person will have any claim whatsoever against the Company, the selling shareholder or any other person as a result of the Private Placing not taking effect. 6.3 Over subscriptions
The maximum number of Sygnia ordinary shares that can be subscribed for and acquired in terms of the Private Placing is 31,224,834 ordinary shares. In the event of an over subscription, ordinary shares will be allocated and issued at the discretion of the directors of Sygnia. Factors to be considered by the Company in allocating ordinary shares include:
- whether the applicant is a client of the Group;
- achieving a spread of shareholders that is acceptable to the JSE;
- promoting liquidity, tradability and an orderly after-market in the ordinary shares of the Company;
- the applicant's Broad-Based Black Economic Empowerment (B-BBEE) status; and
- the total amount applied for by respective applicants.
There is no preference on allotment to any particular company or group, save as set out above in the event of an over subscription.
6.4 Dates and times of the opening and closing of the Private Placing
2015
Abridged Pre-Listing Statement released on SENS Thursday, 1 October
Abridged Pre-Listing Statement published in the South African press Thursday, 1 October
Opening date of the Private Placing (09h00) Thursday, 1 October
Closing date of the Private Placing (12h00) Thursday, 8 October
Notification of allotments Friday, 9 October
Results of the Private Placing released on SENS Monday, 12 October
Results of the Private Placing published in the South African press Monday, 12 October
Listing date (09h00) Wednesday, 14 October
Accounts at CSDP or broker updated and debited in respect of Wednesday, 14 October dematerialised shareholders
All dates and times are South African dates and times. The above dates and times are subject to amendment. Any such amendment will be announced on SENS and published in the South African press. 7. SUMMARISED FINANCIAL INFORMATION OF SYGNIA
For the year ended For the year ended (Rands)
30 September 2015* 30 September 2014
Revenue 239 454 159 165 798 175 Expenses (168 871 122) (125 998 291) Operating profit 70 583 037 39 799 884 Finance income 5 814 905 4 256 073 Finance costs (196 071) (61 229) Other income 4 970 768 10 764 923 Operating profit before tax 81 172 639 54 759 651 Income tax expense (23 319 532) (16 294 133) Net profit for the period 57 853 107 38 465 518 Other comprehensive income - - Total comprehensive income for the period 57 853 107 38 465 518 Profit attributable to:
Owners of the Company 57 853 107 38 465 518 Non-controlling interest
Weighted average number of ordinary shares in 100 000 000 100 000 000 issue
Basic and diluted earnings per share (cents) 57.85 38.47 Headline and diluted headline earnings per 58.88 42.11 share (cents)
Net asset value per share (Rand) 1.35 1.27 Tangible net asset value per share (Rand) 1.32 1.23
*The 30 September 2015 figures are an aggregation of the interim historical financial information of Sygnia for the 6 months ended 31 March 2015, the profit estimate for the 4 months ended 31 July 2015 and the profit forecast for the 2 months ending 30 September 2015. 8. COPIES OF THE PRE-LISTING STATEMENT
Copies of the Pre-Listing Statement will be available during normal business hours at the Company's registered office (7th Floor, The Foundry, Cardiff Street, Green Point, Cape Town) and the Company's office in Johannesburg (Unit 40, 6th Floor, Katherine and West Building, West Street, Sandton) from 1 October 2015. The Pre-Listing Statement may also be obtained from Sygnia's website (www.sygnia.co.za). Sponsor
Nedbank Limited, acting through its Corporate Finance business unit Attorneys Cliffe Dekker Hofmeyr Incorporated Auditor and Reporting Accountant KPMG Inc. Reporting Accountant Deloitte & Touche Johannesburg 1 October 2015
Date: 01/10/2015 07:30:00 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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