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Abridged audited consolidated annual financial statements for the year ended 30 September 2016
SYGNIA LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
Registration number: 2007/025416/06
Share Code: SYG
ISIN: ZAE000208815
“Sygnia” or “the Group”
ABRIDGED AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2016
DIRECTORS’ REPORT
The directors have pleasure in presenting their report on the activities of the Group for the year ended 30 September 2016.
MAIN BUSINESS AND OPERATIONS
HIGHLIGHTS
• Assets under management and administration of R158.4 billion as at 30 September 2016, up 16.0%
• Profit after tax of R72.3 million, up 21.9%
• Adjusted headline earnings per share of 53.10 cents and adjusted diluted headline earnings per share of 52.59 cents
• Total dividend per share of 52.00 cents
STATE OF AFFAIRS
Sygnia Limited’s financial results are reflective of three main themes, continuing growth in client numbers and assets under
management and administration, increased expenditure on systems and staff to build operational capacity and the
challenges presented by volatile and unpredictable investment markets and a shrinking institutional savings pool.
The stated objectives of the Group at the time of listing on 14 October 2015 were to increase its corporate profile and brand
awareness and to pursue organic growth strategies through systems development, increased marketing and advertising and
the expansion of distribution channels. The past twelve months have been focused on meeting those objectives, as well as
building products and platforms to facilitate future growth. Sygnia’s key focus on a) lowering the cost of saving and investing
for all South Africans, b) the delivery of innovative products and c) strong long-term performance across our product ranges,
resulted in net inflows of R11.3 billion across all of the main investment product lines, including multi-management, index
tracking and funds of hedge funds over the 12 months to September 2016. There was a further R4.9 billion in inflows related
to the acquisition of the Gallet group. The investment administration division, however, experienced net outflows of
R5.4 billion, a direct reflection of the shrinking institutional savings pool in South Africa as the pace of retrenchments and
retirements exceeds new job creation. Overall, net inflows contributed R10.8 billion to growth in assets under management
and administration.
FINANCIAL RESULTS
Sygnia’s revenue in the financial year to September 2016 grew by 18.0% to R276.2 million compared to the prior financial
year (2015: R234.1 million), while total expenses, at R198.7 million, rose by 23.7% (2015: R160.6 million). Profits after tax
rose by 21.9% to R72.3 million (2015: R59.3 million). This translated into adjusted headline earnings per share of
53.10 cents (2015: 60.40 cents) and adjusted diluted headline earnings per share of 52.59 cents (2015: 60.40 cents).
The 12-month adjusted headline earnings per share comparisons are distorted by the fact that on
30 September 2015 shares in issue totalled 100,000,000. This increased to 137,178,000 at the time of listing on
14 October 2015.
Matters material for the shareholders to appreciate the state of affairs of the Group
On 1 October 2015 Sygnia Asset Management repurchased a portion of its shares held by Ulundi Holdings Proprietary
Limited for a consideration of R14,293,066. Ulundi Holdings exchanged its remaining shareholding in Sygnia Asset
Management Proprietary Limited for shares in Sygnia Limited. This resulted in an additional 8,933,166 ordinary shares
being issued.
Sygnia Limited listed on the Main Board of the JSE in the financial services sector on 14 October 2015. The listing was
facilitated by way of a private placement of 28,244,834 additional ordinary shares which were issued on the date of listing,
resulting in 137,178,000 ordinary shares being listed on the JSE.
On 1 October 2015 Sygnia made an offer to participants of the employee share option scheme to acquire 2,595,242
ordinary shares at a 40% discount to the private placing price. On 1 February 2016 and 30 September 2016 Sygnia made
additional offers to participants of the employee share option scheme to acquire respectively 217,413 and 1,033,422
ordinary shares at R13.80 and R14.96. The options shall be exercisable as follows: 20% shall be exercisable on the third
anniversary of the option date, 30% on the fourth anniversary of the option date and 50% on the fifth anniversary of the
option date.
Sygnia Limited acquired 100% of the issued share capital of Gallet Group Employee Benefits Proprietary Limited (“Gallet”)
during the current year. Refer to note 6 of the consolidated financial statements for more information.
There are no other material matters for the shareholders to appreciate the state of affairs of the Group.
BUSINESS REVIEW
Sygnia’s revenue is linked to its assets under management and administration, and the company is reliant on both market
movements and new business inflows for growth. From an investments perspective, 2016 was dominated by uncertainty
around the timing of US interest rate increases, central banks using unconventional methods to boost growth and the
political risks emanating from both Brexit and domestic upheaval. For the 12-month period the FTSE/JSE All Share Index
delivered a return of just 6.6%, the JSE All Bond Composite Index 7.6% and the MSCI World Index 10.5% in rand terms.
It is thus pleasing that, against that backdrop, Sygnia’s assets under management and administration increased by 16.0% to
R158.4 billion as at 30 September 2016 (2015: R136.6 billion).
Institutional assets under management and administration increased by 15.1% to R147.2 billion (2015: R127.9 billion), while
retail assets under management rose by 28.7% to R11.2 billion (2015: R8.7 billion). Assets administered through the LISP rose
by 80% to R5.4 billion (2015: R3.0 billion). Assets under management in index-tracking strategies increased by 42.6% to R14.4
billion (2015: R10.1 billion). The funds of hedge funds have had a strong year in terms of asset flows with assets under
management increasing to R3.9 billion as at 30 September 2016 (2015: R2.2 billion).
MARKET POSITIONING
Sygnia has positioned itself as being a market disruptor, aiming to transform the existing financial services landscape,
characterised by complexity and high cost, through introducing simplicity, convenience, accessibility and affordability to South
African consumers. The Group believes that this is an appropriate and unique niche which will help it to differentiate itself
from competitors and ultimately capture a significant market share.
INSTITUTIONAL BUSINESS
On the institutional side Sygnia offers three main product lines, a range of balanced multi-manager funds (the Sygnia
Signature funds), a range of balanced and single asset class passive funds (the Sygnia Skeleton funds), and funds of hedge
funds, as well as a number of customised investment product ranges, and investment administration services.
The institutional savings pool in South Africa available to independent asset managers is reducing in response to wide-
spread retrenchments, the collapse of stand-alone retirement funds into umbrella funds and weak macro-economic
fundamentals.
In Sygnia’s case its institutional business growth prospects have been substantially strengthened by the launch of the
revolutionary Sygnia Umbrella Retirement Fund (“SURF”) which combines the most advanced thinking on benefit design,
Sygnia’s leading-edge technology platforms and the lowest costs in South Africa. SURF provides the complete savings and
investment answer with no need for members to ever leave SURF despite their changing personal circumstances or their
retirement. Within five months of its launch SURF has become a well-known alternative to the established umbrella funds
typically sponsored by life insurance companies. SURF is expected to become a very significant distribution channel for
Sygnia’s asset management capabilities going forward. SURF has grown from R1.2 billion in assets under management at
launch to R1.5 billion as at 30 September 2016, with a further R1.2 billion in assets awaiting regulatory approval for
transfer.
HIGHLIGHTS INCLUDE:
• Of the flagship risk-profiled multi-manager products, the Sygnia Signature 40 and 70 Funds ranked 1st while the Sygnia
Signature 50 and 60 Funds ranked 2nd in terms of returns over 3 years in their respective risk categories in the Alexander
Forbes Multi-Manager Watch TM Survey to the end of September 2016. Over 5 years the Sygnia Signature 40, 50 and 60
Funds ranked 1st while the Sygnia Signature 70 Fund ranked 2nd.
• The Sygnia All-Star Fund of Hedge Funds ranked 1st over 3 and 5 years in the Alexander Forbes Fund of Hedge Funds
Manager Watch TM Survey to the end of September 2016 in the Multi-Strategy category.
• The Sygnia Signature Fund of Hedge Funds ranked 2nd , a step behind the Sygnia All-Star Fund of Hedge Funds, over 3 and
5 years in the Alexander Forbes Fund of Hedge Funds Manager Watch TM Survey to the end of September 2016 in the
Multi-Strategy category.
• When compared to the performance of the large single asset managers, as published in the Alexander Forbes Global
Large Manager Watch TM Survey to September 2016, the Sygnia Signature 70 Fund ranked 1st over 3 and 5 years. The
significance of this lies in the fact that multi-manager products can compete directly with single asset managers’ products
and can offer a compelling alternative to the self-selection of single asset managers by retirement funds.
RETAIL BUSINESS
On the retail side Sygnia offers a suite of multi-manager “CPI plus target” unit trusts and a wide range of index-tracking unit
trusts, spanning multi-asset class products, equities, bonds, international investments and property. The Sygnia LISP platform
offers retail investors a suite of savings products, including retirement annuities, living annuities, preservation funds and tax
free savings accounts.
In 2016 our retail technology platform expanded significantly in terms of functionality, including the launch of the Sygnia
RoboAdvisor, a digital financial planning tool which opens up new distribution channels for the retail business. This includes
access to a younger generation of savers, as well as to independent financial advisors who want to partner with Sygnia in
delivering consistent quality advice to clients.
As at 30 September 2016, the performance of the majority of our flagship unit trusts ranked in the 1st quartile of their
respective categories since inception.
HIGHLIGHTS INCLUDE:
• The Sygnia Skeleton Balanced 70 Fund, a passively managed high-equity multi-asset class unit trust, ranked 27th out of
108 unit trusts*, most of them actively managed, in the South African – Multi-Asset – High Equity category since its
inception in November 2013 to September 2016.
• The Sygnia Skeleton Balanced 60 Fund, a passively managed medium-equity multi-asset class unit trust, ranked 9th out of
60 unit trusts*, most of them actively managed, in the South African – Multi-Asset – Medium Equity category since its
inception in June 2014 to September 2016.
• The Sygnia Skeleton Balanced 40 Fund, a passively managed low-equity multi-asset class unit trust, ranked 23rd out of 96
unit trusts*, most of them actively managed, in the South African – Multi-Asset – Low Equity category since its inception in
April 2014 to September 2016.
• The Sygnia SWIX Index Fund, a passively managed equity unit trust, ranked 25th out of 119 unit trusts*, most of them
actively managed, in the South African – Equity – General category since its inception in November 2013 to September
2016.
• The Sygnia Top 40 Index Fund, a passively managed equity unit trust, ranked 6th out of 13 unit trusts*, most of them
actively managed, in the South African – Equity – Large Cap category since its inception in November 2013 to September
2016.
• The Sygnia Active Equity Fund, an actively managed equity unit trust, ranked 48th out of 130 unit trusts*, in the South
African – Equity – General category since its inception in August 2014 to September 2016.
• The Sygnia Value Fund, an actively managed equity unit trust, ranked 2nd out of 140 unit trusts*, in the South African –
Equity – General category since its inception in February 2015 to September 2016.
• The Sygnia Equity Fund, an actively managed multi-manager equity unit trust, ranked 24th out of 117 unit trusts*, in the
South African – Equity – General category since its inception in September 2013 to September 2016.
• The Sygnia CPI + 2% Fund ranked 9th out of 91 unit trusts* in the South African - Multi-Asset - Low Equity category for the
3 years to September 2016.
• The Sygnia CPI + 4% Fund ranked 2nd out of 54 unit trusts* in the South African – Multi-Asset – Medium Equity category
for the 3 years to September 2016.
• The Sygnia CPI + 6% Fund ranked 16th out of 106 unit trusts* in the South African – Multi-Asset – High Equity category for
the 3 years to September 2016.
*Source: MoneyMate
The Sygnia LISP has continued to grow at a rapid pace since its launch in October 2013, with 5,981 individual accounts having
been opened.
NEW INITIATIVES
In line with Sygnia’s focus on being regarded as a “fintech” group, Sygnia launched a unique new product, the Sygnia 4th
Industrial Revolution Global Equity Fund, on 1 November 2016, in collaboration with Kensho Technologies Inc., a US-based
big data analytics company. The fund tracks 13 market indices composed of companies driving the 4th Industrial Revolution,
including themes such as virtual reality, 3D printing, nanotechnology, clean tech and autonomous cars amongst others.
Sygnia has also launched its first radio advertising campaign and intends to increase its advertising and marketing
expenditure significantly in 2017 in order to increase the profile and visibility of the brand among retail investors.
Although the key focus remains on organic growth, the Group will pursue strategic acquisitions, particularly in terms of
growing SURF to a critical size.
TRANSFORMATION AND OWNERSHIP
Sygnia is committed to being a representative South African company. To that effect the group continues to promote the
principles embodied in the Financial Sector Code across the business. Broad-based staff ownership has been facilitated
through listing the company on the Johannesburg Stock Exchange. Sygnia also brought on board a number of other BEE
shareholders.
• As at 30 September 2016 Sygnia Asset Management was a Level 2 contributor in terms of the Financial Sector Code.
• 51% of staff is black. 50% of the board of directors is black.
• All qualifying staff with more than one year of service participate in the broad-based BEE staff scheme, the Ulundi Trust,
which controls 6.5% of Sygnia Limited.
STATED CAPITAL
Sygnia Limited listed on the Main Board of the JSE in the financial services sector on 14 October 2015. The listing was
facilitated by way of a private placement of 28,244,834 additional ordinary shares which were issued on the date of listing,
resulting in 137,178,000 ordinary shares being listed on the JSE. As at 30 September 2016, 137,178,000 ordinary shares are
in issue.
EXTERNAL AUDIT OPINION
These abridge consolidated financial statements have been extracted from the audited consolidated annual financial
statements but have not, in themselves, been audited. The consolidated annual financial statements have been audited by
the Group’s external auditors, KPMG Inc. The external auditor’s unqualified audit report and the audited consolidated annual
financial statements are available for inspection at the Company’s registered office in terms of 3.18 (F) of the JSE Listing
Requirements.
FINAL CASH DIVIDEND
Sygnia is committed to rewarding its shareholders with regular distributions of free cash flow generated. Accounting for
projected cash requirements, a gross dividend (no 2) for the year ended 30 September 2016 of 27.00 cents per share has
been declared out of income reserves, resulting in a net dividend of 22.95 cents per share for shareholders subject to
Dividends Tax (“DT”).
In compliance with the JSE Listings Requirements, the following dates are applicable:
Last day to trade: Tuesday, 3 January 2017
Shares trade ex dividend: Wednesday, 4 January 2017
Record date: Friday, 6 January 2017
Payment date: Monday, 9 January 2017
Share certificates may not be dematerialised or re-materialised between, Wednesday, 4 January 2017 and Friday, 6 January
2017, both dates inclusive. In terms of the dividend, the following additional information is disclosed:
– The local DT rate is 15%
– The number of ordinary shares in issue at the date of this declaration is 137,178,000
– Sygnia’s tax reference number is 9334/221/16/6
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AT 30 SEPTEMBER 2016
NOTES CONSOLIDATED CONSOLIDATED
2016 2015
R R
ASSETS
Intangible assets 5 32 609 394 1 539 661
Deferred tax assets 4 881 420 3 857 822
Property and equipment 31 130 818 29 844 963
Investments linked to investment
39 052 873 089 27 631 242 783
contract liabilities
Investments 266 718 900 67 358 495
Loans receivable 11 438 324 11 306 658
Tax receivable 994 062 369 513
Trade and other receivables 32 417 453 29 665 198
Amounts owing by clearing houses 6 - 21 553 699
Amounts owing by clients 7 171 954 194 5 430 184
Cash and cash equivalents 8 218 351 424 102 030 889
TOTAL ASSETS 39 823 369 078 27 904 199 865
EQUITY
Stated capital 9 507 728 719 271 210 689
Retained earnings 131 607 320 91 397 091
Reserves (217 849 681) (219 299 987)
TOTAL EQUITY 421 486 358 143 307 793
LIABILITIES
Deferred tax liabilities 18 584 382 27 049 808
Investment contract liabilities 38 182 959 220 26 914 802 175
Third-party liabilities arising on consolidation
10 688 187 295 575 790 766
of unit trust funds
Tax payable 703 873 1 389 780
Trade and other payables 11 339 106 858 200 131 900
Dividend payable - 2 550 000
Amounts owing to clearing houses 6 107 751 717 -
Amounts owing to clients 7 64 097 106 31 578 463
Bank overdraft 8 492 269 7 599 180
TOTAL LIABILITIES 39 401 882 720 27 760 892 072
TOTAL EQUITY AND LIABILITIES 39 823 369 078 27 904 199 865
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2016
CONSOLIDATED CONSOLIDATED
2016 2015
NOTES R R
Revenue 276 248 535 234 050 879
Expenses (198 748 684) (160 607 113)
Investment contract income 2 606 691 940 2 502 390 290
Transfer to investment contract liabilities (2 606 691 940) (2 502 390 290)
Interest income 13 432 549 6 496 655
Other investment income 13 391 694 4 040 848
Fair value adjustment to third-party liabilities (2 760 139) -
PROFIT FROM OPERATIONS 101 563 955 83 981 269
Finance costs (655 299) (445 297)
PROFIT BEFORE TAX 100 908 656 83 535 972
Tax (28 603 927) (24 224 013)
TOTAL PROFIT AND COMPREHENSIVE INCOME
FOR THE YEAR 72 304 729 59 311 959
EARNINGS PER SHARE (CENTS) 12
Basic 56.82 59.31
Diluted 54.15 59.31
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2016
COMMON SHARE-BASED
STATED CONTROL GROUP EQUITY PAYMENT RETAINED TOTAL
CAPITAL RESERVE ADJUSTMENT RESERVE EARNINGS CAPITAL
NOTES R R R R R R
BALANCE AT 1 OCTOBER 2014 272 858 029 (252 576 998) (307 062) 33 584 073 73 152 837 126 710 879
Total comprehensive income
Total profit and comprehensive income for the year - - - - 59 311 959 59 311 959
TOTAL COMPREHENSIVE INCOME FOR THE YEAR - - - - 59 311 959 59 311 959
Transactions with owners
Dividends paid - - - - (41 067 705) (41 067 705)
Transaction costs on issue of ordinary shares 9 (1 647 340) - - - - (1 647 340)
TOTAL TRANSACTIONS WITH OWNERS (1 647 340) - - - (41 067 705) (42 715 045)
BALANCE AT 30 SEPTEMBER 2015 271 210 689 (252 576 998) (307 062) 33 584 073 91 397 091 143 307 793
Total comprehensive income
Total profit and comprehensive income for the year - - - - 72 304 729 72 304 729
TOTAL COMPREHENSIVE INCOME FOR THE YEAR - - - - 72 304 729 72 304 729
Transactions with owners
Dividends paid - - - - (32 094 500) (32 094 500)
Share issue 9 237 256 606 - - - - 237 256 606
Share option expense 13 - - - 1 450 306 - 1 450 306
Transaction costs on issue of ordinary shares 9 (738 576) - - - - (738 576)
TOTAL TRANSACTIONS WITH OWNERS 236 518 030 - - 1 450 306 (32 094 500) 205 873 836
BALANCE AT 30 SEPTEMBER 2016 507 728 719 (252 576 998) (307 062) 35 034 379 131 607 320 421 486 358
ABRIDGED AUDITED CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
CONSOLIDATED CONSOLIDATED
2016 2015
NOTES R R
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated by operations 105 517 646 134 465 954
Dividends received 1 276 083 768 478
Interest received 12 838 160 6 547 843
Interest paid (655 299) (445 297)
Taxation paid (34 562 809) (27 228 492)
NET CASH INFLOW FROM OPERATING ACTIVITIES 84 413 781 114 108 486
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (8 333 289) (17 095 471)
Additions to intangible assets 5 (2 362 039) (2 360 828)
Purchase of investments (179 677 102) (47 122 376)
Proceeds on sale of investments 51 037 833 43 707 231
Acquisition of subsidiary, net of cash acquired (25 635 784) -
Proceeds on disposals of property and equipment - 1 486 381
Proceeds on disposals of intangible assets 2 110 516 -
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (162 859 865) (21 385 063)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (34 644 500) (38 517 705)
Issue of ordinary shares 237 256 606 -
Transaction costs on issue of ordinary shares (738 576) (1 647 340)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 201 873 530 (40 165 045)
NET INCREASE IN CASH AND CASH EQUIVALENTS 123 427 446 52 558 378
Cash and cash equivalents at beginning of the year 8 94 431 709 41 873 331
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 8 217 859 155 94 431 709
Cash and cash equivalents at the end of the year included the
following cash held on behalf of policyholders and clients. 57 598 344 48 799 693
NOTE TO THE STATEMENT OF CASH FLOWS:
Cash held in overnight settlement accounts on behalf of policyholders of Sygnia Life and customers of Sygnia Securities is included on the face of the statement of
financial position under “Cash and cash equivalents” with a corresponding payable to clients included in amounts owing to clients. This results in the movement in
these cash amounts being disclosed in the statement of cash flows. Changes in these amounts are shown under the “Changes in working capital”, under the “Cash
Flows from Operating Activities” section on the statement of cash flows. These cash amounts fluctuate on a daily basis and can result in significant fluctuations if
comparing “Changes in working capital” between reporting periods.
NOTES TO THE ABRIDGED AUDITED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
1. BASIS OF PREPARATION
The abridged audited consolidated financial information has been prepared in accordance with IAS 34 Interim Financial
Reporting, as well as the AC 500 standards as issued by the Accounting Practices Board, the requirements of the South
African Companies, Act No. 71 of 2008 and the Listings Requirements of the JSE. The abridged audited consolidated financial
statements do not include all of the information required for full financial statements.
The abridged audited consolidated financial statements have been prepared on the basis of accounting policies applicable to
a going concern. The basis presumes that funds will be available to finance future operational and that the realisation of
assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The
abridged audited consolidated financial statements are presented in South African Rand. The abridged audited consolidated
financial statements have been prepared on the historical cost basis, except for the measurement of financial instruments.
The accounting policies applied in the presentation of the abridged audited consolidated financial statements are in
accordance with International Financial Reporting Standards and are consistent with those presented in the previous
consolidated annual financial statements.
This abridged report is extracted from audited information, but is not itself audited. The auditor’s unqualified audit report
and the audited financial statements are available for inspection at the Company’s registered office in terms of 3.18 (F) of the
Listings Requirements. These abridged audited consolidated financial statements were prepared under the supervision of NJ
Giles, BBusSc (Finance), CA (SA), CFA (Financial Director), and approved by the Board of Directors on 28 November 2016.
2. USE OF ESTIMATES AND JUDGEMENTS
The preparation of the abridged audited consolidated financial statements in conformity with IFRS requires management to
make judgements, estimates and assumptions that affect the application of policies and the reporting amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis by the directors and management. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in
the period of the revision and future periods if the revision affects both current and future periods.
2. USE OF ESTIMATES AND JUDGEMENTS (Cont.)
The significant judgements made by management in applying the Group’s accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30
September 2015, except for judgements used in business combinations and estimates relating to the valuation of the share-
based payment expense where inputs based on observable market data are used to estimate the fair value of the share-
based payment.
Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. The areas
of the Group’s business that typically require such estimates and judgements are the determination of the fair value for
financial assets and liabilities, capitalisation of development costs as intangible assets, judgements relating to goodwill arising
on acquisition of a subsidiary and share-based payments. For estimates and judgements on goodwill, intangible assets, and
share-based payments refer to the notes 4, 5 and 13 respectively. Further information about the assumptions made in
measuring fair values are disclosed in the notes to the audited consolidated financial statements which are available for
inspection.
3. SEGMENT INFORMATION
The Group has identified Sygnia’s executive committee as the Chief Operating Decision Maker (“CODM”). The responsibility of
the executive committee is to assess performance and to make resource allocation decisions across the Group. The Group
provides investment management and administration services to institutional and retail clients predominantly located in
South Africa. No disaggregated information is provided to the CODM on the separate operations of the Group, and the
CODM assesses operating performance and makes resource decisions about the Group based on the combined results of
these operations. The Group has therefore concluded that the combined operations of the Group constitute one operating
segment.
4. ACQUISITION OF SUBSIDIARY
During the year, the Group acquired 200 shares of no par value, being the entire issued share capital, in Gallet Group
Employee Benefits Proprietary Limited (“Gallet”) for a consideration of R28,842,795. The consideration was settled by a cash
payment and the Group obtained control on the 4 April 2016, being the acquisition date.
The Group acquired Gallet to accelerate its expansion into the umbrella fund market and provide a platform for the launch of
SURF. The acquisition will also enable the Group to have access to Gallet’s client base and the Group also expects to reduce
costs through economies of scale.
For the 6 months ended 30 September 2016, Gallet contributed revenue of R12.8 million and profit after tax of R4.2 million. If
the acquisition had occurred on 1 October 2015, management estimates that consolidated revenue would have been
R306.2 million and consolidated profit after tax for the year R81.3 million. In determining these amounts management has
assumed that the efficiencies and economies of scale would be effective from 1 October 2015.
DETAILS OF THE NET ASSETS ACQUIRED ARE AS FOLLOWS: R
Cash and cash equivalents 3 207 011
Deferred tax assets 770 041
Intangible assets 14 243 086
Loans receivable 793 539
Property and equipment 163 141
Trade and other receivables 3 202 761
Deferred tax liabilities (3 397 120)
Taxation payable (363 895)
Trade and other payables (8 262 026)
NET ASSET VALUE AS AT 4 APRIL 2016 10 356 538
MEASUREMENT OF FAIR VALUES
The detail of the net assets acquired, as disclosed above, represent fair value. All the gross contractual receivables are
expected to be collected. The valuation techniques used for measuring the fair value of material assets acquired were as
follows:
Asset acquired Valuation technique
Intangible assets: The fair values of customer relationships acquired through the business combination are
determined by using a discounted cash flow valuation method. The discount rate is based on the
long-term risk-free rate with risk premiums added for market and other company and asset-
specific risks. Intangible assets acquired through business combinations were valued using a
discount rate of 32.7% for the 2016 financial year.
ACQUISITION RELATED COSTS
The Group incurred acquisition related costs of R937,875 on legal fees and due diligence costs. These costs have been
included in profit or loss.
GOODWILL
Goodwill is attributable to the synergies expected to be achieved from integrating Gallet into the Group’s existing business as
well as the assembled workforce and umbrella fund market presence.
GOODWILL ARISING FROM THE ACQUISITION HAS BEEN RECOGNISED AS FOLLOWS:
R
Consideration transferred 28 842 795
Fair value of identifiable net assets 10 356 538
GOODWILL 18 486 257
5. INTANGIBLE ASSETS
OPENING ACQUISITIONS CLOSING
BALANCE AT 1 THROUGH BUSINESS BALANCE AT 30
OCTOBER 2015 ADDITIONS COMBINATIONS DISPOSALS SEPTEMBER 2016
2016 R R R R R
AT COST
Computer software 10 191 328 2 362 039 - - 12 553 367
Goodwill 410 015 - 18 486 257 - 18 896 272
Customer relationships - - 14 243 086 (2 110 516) 12 132 570
10 601 343 2 362 039 32 729 343 (2 110 516) 43 582 209
OPENING CLOSING
BALANCE AT 1 BALANCE AT 30
OCTOBER 2015 AMORTISATION SEPTEMBER 2016
R R R
ACCUMULATED AMORTISATION AND IMPAIRMENT
Computer software 9 030 822 1 271 323 10 302 145
Goodwill 30 860 - 30 860
Customer relationships - 639 810 639 810
9 061 682 1 911 133 10 972 815
CARRYING AMOUNT R
Computer software 2 251 222
Goodwill 18 865 412
Customer relationships 11 492 760
32 609 394
Included in the computer software carrying amount (as disclosed above) is an amount of R2,250,874 (2015: R1,148,070)
representing internally developed software. The carrying amount of computer software and customer relationships are
reviewed for impairment when an impairment indicator is identified. Goodwill is tested for impairment annually at year end.
Critical accounting estimates and judgements
Based on the impairment indicator tests described below, where impairment indicators were identified, management
assessed the recoverable amount of the cash-generating units (CGUs) based on value-in-use calculations of the various
CGUs. These calculations use cash flow projections based on financial budgets approved by management covering no longer
than a five-year planning period. Where appropriate, cash flows were extrapolated into perpetuity by using a terminal growth
rate model. A key input used in the models to determine the value-in-use of the CGUs is the pre-tax discount rate applied to
management’s forecasted cash flows, which reflects the current market assessments of time value of money and the risk
specific to the CGU.
Impairment of goodwill evaluation
When goodwill is evaluated for impairment on an annual basis, the value in use is assessed using a discounted cash flow
based valuation of the CGUs to which the goodwill can be allocated on a reasonable basis.
These assumptions have been used in estimating the value in use of the CGU’s to which the goodwill has been allocated:
Risk-free rate (R186 Government bond) 8.67%
Tax rate 28.0%
Growth rate 6.5%
Terminal growth rate 6.0%
Discount rate 29.9%
IMPAIRMENT INDICATOR EVALUATION ON COMPUTER SOFTWARE AND CUSTOMER RELATIONSHIPS
The carrying values of computer software and customer relationships were carefully assessed at 30 September 2016, and
management does not deem any to be impaired.
6. AMOUNTS OWING (TO)/BY CLEARING HOUSES
CONSOLIDATED CONSOLIDATED
2016 2015
R R
OWING BY CLEARING HOUSES
Equities 64 065 106 26 983 883
OWING TO CLEARING HOUSES
Equities (171 816 823) (5 430 184)
NET AMOUNT OWING (TO)/BY CLEARING HOUSES (107 751 717) 21 553 699
Amounts owing (to)/by clearing houses reflect unsettled client trades at reporting date.
7. AMOUNTS OWING (TO)/BY CLIENTS
In terms of Section 21 of the Financial Markets Act of 2012, cash held for client accounts and in the client’s name is held with
JSE Trustees Proprietary Limited (“JSE Trustees”). The amounts owing to and from clients represent unsettled exchange
traded transactions at year end. At year end client money held with the JSE Trustees amounted to R81,592,643 (2015:
R253,999,964). The year-end JSE Trustee balance does not reflect the impact of unsettled purchases between trade and
settlement date of R171,954,194 (2015: R5,430,184) reduced by amounts receivable from clients of R137,371 (2015: Rnil)
totalling R171,816,823 (2015: R5,430,184), unsettled sales between trade and settlement date of R64,065,106
(2015: R26,983,883) and client deposits of R32,000 (2015: R4,594,580), totalling R64,097,106 (2015: R31,578,463), which have
been taken into account in amounts owing to and by clients.
8. CASH AND CASH EQUIVALENTS
CONSOLIDATED CONSOLIDATED
2016 2015
R R
Current accounts 136 171 424 77 780 889
Fixed deposits and call accounts 82 180 000 24 250 000
218 351 424 102 030 889
Bank overdraft (492 269) (7 599 180)
TOTAL CASH AND CASH EQUIVALENTS 217 859 155 94 431 709
Cash and cash equivalents comprise balances with banks and excludes cash balances held in policyholder investment
portfolios.
9. STATED CAPITAL
STATED
NUMBER OF CAPITAL
SHARES R
AUTHORISED
500,000,000 Ordinary shares of no par value
(2015: 500,000,000 Ordinary shares of no par value)
ISSUED
As at 1 October 2014 200 2 858 029
Share split 59 999 800 -
Issue of ordinary shares 40 000 000 270 000 000
Transaction costs on issue of ordinary shares - (1 647 340)
AS AT 30 SEPTEMBER 2015 100 000 000 271 210 689
STATED
NUMBER OF CAPITAL
SHARES R
Issue of ordinary shares - 1 October 2015* 8 933 166 -
Issue of ordinary shares - 14 October 2015* 28 244 834 237 256 606
Transaction costs on issue of ordinary shares - (738 576)
AS AT 30 SEPTEMBER 2016 137 178 000 507 728 719
The unissued shares at 30 September 2016 are under the control of the directors until the next annual general meeting. The
directors are authorised to buy back shares under general approval subject to certain limitations and the JSE Listing
Requirements.
*The issue of ordinary shares on 1 October 2015 and 14 October 2015 relate to the Ulundi Settlement and Private
Placement respectively. Please refer to Sygnia Limited’s Pre-Listing statement issued on 1 October 2015 for more
information.
10. THIRD-PARTY LIABILITIES ARISING ON CONSOLIDATION OF UNIT TRUST FUNDS
CONSOLIDATED CONSOLIDATED
2016 2015
R R
Balance at the beginning of the year 575 790 766 -
Capital contributions received 89 201 966 580 052 420
Fair value adjustment to third-party liabilities (40 400 597) (4 261 654)
Fair value adjustment to third party liabilities linked to
(2 760 139) -
consolidated unit trust funds
Consolidation of additional unit trust funds 66 355 299 -
688 187 295 575 790 766
11. TRADE AND OTHER PAYABLES
CONSOLIDATED CONSOLIDATED
2016 2015
R R
Accruals 17 809 103 6 965 765
Dividend tax payable 289 877 3 621 765
Investment contract portfolio creditors 220 702 778 98 533 709
Investment contract portfolio management fee accrual 11 882 648 15 242 459
Sundry creditors 12 479 740 9 855 873
Trade creditors 16 599 965 16 653 945
Unsettled trades 57 566 344 47 943 927
Value added tax payable 1 776 403 1 314 457
339 106 858 200 131 900
12. EARNINGS AND HEADLINE EARNINGS PER SHARE
CONSOLIDATED CONSOLIDATED
2016 2015
R R
Profit attributable to ordinary shareholders 72 304 729 59 311 959
NON-HEADLINE ITEMS (NET OF TAX)
Loss on disposal of plant and equipment
Gross amount 7 164 66 859
Tax effect (2 006) (18 721)
5 158 48 138
Impairment of intangible assets
Gross amount - 1 440 301
Tax effect - (403 284)
- 1 037 017
HEADLINE EARNINGS 72 309 887 60 397 114
The weighted average number of shares, diluted weighted average number of shares and adjusted diluted weighted average
number of shares were calculated as follows:
NUMBER OF NUMBER OF
SHARES SHARES
2016 2015
Number of ordinary shares at the beginning of the year 100 000 000 200
Effect of share split - 59 999 800
Number of shares issued during the year 37 178 000 40 000 000
NUMBER OF ORDINARY SHARES AT END OF THE YEAR 137 178 000 100 000 000
Weighted average number of ordinary shares 127 241 602 100 000 000
Number of bonus element shares to be issued in terms of share
option scheme and the Ulundi BEE transaction 6 280 348 -
DILUTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES 133 521 950 100 000 000
Weighted average number of ordinary shares 127 241 602 100 000 000
Shares held under the Ulundi BEE transaction 8 933 166 -
ADJUSTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES 136 174 768 100 000 000
Number of bonus element shares to be issued in terms of share option scheme 1 314 361 -
ADJUSTED DILUTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES 137 489 129 100 000 000
NUMBER OF NUMBER OF
SHARES SHARES
2016 2015
BASIC AND DILUTED EARNINGS PER SHARE
Earnings attributable to ordinary shareholders (R) 72 304 729 59 311 959
Headline earnings (R) 72 309 887 60 397 114
Weighted average number of ordinary shares in issue (basic) 127 241 602 100 000 000
Weighted average number of ordinary shares in issue (diluted) 133 521 950 100 000 000
Weighted average number of ordinary shares in issue (adjusted basic) 136 174 768 100 000 000
Weighted average number of ordinary shares in issue (adjusted diluted) 137 489 129 100 000 000
2016 2015
CENTS CENTS
Earnings per share (basic) 56.82 59.31
Earnings per share (diluted) 54.15 59.31
Headline earnings per share (basic) 56.83 60.40
Headline earnings per share (diluted) 54.16 60.40
Adjusted headline earnings per share (basic) 53.10 60.40
Adjusted headline earnings per share (diluted) 52.59 60.40
Net asset value per share 307.26 143.31
Tangible net asset value per share 282.14 138.09
Net asset value per share is calculated by dividing the Group’s total assets less its liabilities by the weighted average number
of ordinary shares in issue. The tangible net asset value is the net asset value excluding intangible assets and deferred tax
divided by the weighted average number of ordinary shares.
Adjusted headline earnings per share
Adjusted headline earnings per share is the more appropriate measure of Sygnia’s financial performance in that it includes all
ordinary shares issued under the Ulundi BEE transaction for both the adjusted basic and diluted headline earnings per share.
13. SHARE-BASED PAYMENT
Employee share option scheme
During the year Sygnia made offers to participants of the employee share option scheme to acquire ordinary shares in Sygnia
Limited. The options shall be exercisable as follows: 20% shall be excercisable on the third anniversary of the option date,
30% on the fourth anniversary of the option date and 50% on the fifth anniversary of the option date. Options exercised by
participants once the minimum date has passed will be settled by the issue of shares in Sygnia Limited. If a participant ceases
to be employed by the Group, all options of the participant are forfeited. For the year ended 30 September 2016, the Group
has recognised R1,450,306 as a share-based payment expense in profit or loss (2015: Rnil).
Allocation date 1 October 2015 1 February 2016 30 September 2016
Number of shares 2 595 242 217 413 1 033 422
Vesting period 1 October 2015 to 1 February 2016 to 30 September 2016 to
30 September 2020 31 January 2021 29 September 2021
Strike price 5.04 13.80 14.96
Value of option 2.63 4.84 3.51
The value of the option represents the fair value on grant date in accordance with IFRS.
The option was valued using a Finite Difference Scheme under Geometric Brownian motion option pricing model with the
following inputs:
Weighted average expected volatility* (%) 26.57% 37.47% 25.13%
Weighted average option life (years) 5.30 5.30 5.30
Weighted average dividend yield (%) 7.01% 5.34% 4.10%
Weighted average risk-free interest rate (%) 7.83% 8.39% 7.69%
Weighted average vesting period (years) 4.30 4.30 4.30
* As Sygnia was either unlisted or newly listed when the share options were issued to staff members, the volatility was
determined from the share prices of companies within the same industry.
SHARE OPTION MOVEMENT NUMBER OF SHARE OPTIONS
As at 30 September 2015 -
Allocated during the year 3 846 077
Forfeited during the year (458 334)
Exercised during the year -
AS AT 30 SEPTEMBER 2016 3 387 743
The weighted average strike price of share options granted in terms of the employee share option scheme during the year
under review was R8.44 per share (2015: N/A) with the weighted average strike price of share option forfeited during the year
being R5.04.
The maximum number of Ordinary Shares which may be utilised for purposes of the Employee Share Option Plan are
5,000,000 and this number may not be exceeded without Shareholders’ approval.
Analysis of outstanding scheme shares by financial year of maturity:
WEIGHTED AVERAGE RANGE OF STRIKE
YEAR END NUMBER STRIKE PRICE PRICE
30 September 2017 - - -
30 September 2018 427 382 5.04 5.04
30 September 2019 891 239 8.03 5.04 - 14.96
30 September 2020 1 443 705 7.83 5.04 - 14.96
30 September 2021 625 417 14.76 13.80 - 14.96
Share-based payment on listing
As part of the listing process, Sygnia issued 70,210 ordinary shares to 59 staff members for no consideration. This resulted in
the Group recognising an expense of R589,764 in relation to this.
14. EVENTS SUBSEQUENT TO THE REPORTING DATE
The directors are not aware of any other matter or circumstances, other than listed below, arising since the end of the
financial period, not otherwise dealt with in the consolidated financial statements, which significantly affect the financial
position of the Group or the results of its operations.
Final dividend
The Board approved and declared a gross final dividend of 27 cents per share on 28 November 2016 from income reserves
for the year ended 30 September 2016.
GENERAL
Board of Directors
MF Wierzycka (chief executive officer)
HI Bhorat (non-executive chairman)
NJ Giles (financial director)
KT Hopkins (independent non-executive director)
SA Zinn (lead independent non-executive director)
IK Moyane (independent non-executive director)
Transfer secretaries
Computershare Investor Services Proprietary limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
Company Secretary
Glen MacLachlan
Registered office
7th Floor, The Foundry
Cardiff Street, Green Point
Cape Town, 8001
Postal Address
PO Box 51591
V&A Waterfront, 8002
External Auditors
KPMG Inc.
1 Mediterranean Street
Foreshore
Cape Town
8001
South Africa
Sponsor
Nedbank Corporate and Investment Banking
Date: 30/11/2016 07:10:00 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
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