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Condensed consolidated interim financial statements for the six months ended 31 March 2017
SYGNIA LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REGISTRATION NUMBER: 2007/025416/06
JSE SHARE CODE: SYG
ISIN CODE: ZAE000208815
("SYGNIA" OR "THE COMPANY" OR
"THE GROUP")
SYGNIA LIMITED:
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2017
SYGNIA HIGHLIGHTS FOR THE SIX MONTHS
ENDED 31 MARCH 2017
Revenue
Rm
77 110 131 147
2014 2015 2016 2017
Assets under management
and administration
Rb
107 121 146 159
2014 2015 2016 2017
Profit after tax
Rm
18.1 29.2 34.9 34.3
2014 2015 2016 2017
Number of staff
91 110 121 179
2014 2015 2016 2017
Interim dividend of
25c PER SHARE
GENERAL INFORMATION
COUNTRY OF INCORPORATION AND DOMICILE:
South Africa
NATURE OF BUSINESS AND PRINCIPAL ACTIVITIES:
Sygnia Limited and its subsidiaries ("the Group") are a specialist financial services group, headquartered in South Africa, and listed
on the Johannesburg Stock Exchange ("JSE"). The Group focuses on the provision of investment management, savings products
and administration solutions to institutional and retail clients predominantly located in South Africa. The main services provided
by the Group include multi-manager investment products, index-tracking investment products, customised/bespoke investment
strategy management, stockbroking, transition management, investment administration/platform services and employee benefit
administration services.
DIRECTORS:
NAME DATE OF APPOINTMENT DATE OF RESIGNATION
MF Wierzycka (CEO) 17/09/2007 -
HI Bhorat (Chairman)(#) 11/06/2015 -
M Buckham (CFO) 01/02/2017 -
KT Hopkins(*#) 11/06/2015 -
SA Zinn (Lead Independent)(*#) 11/06/2015 -
IK Moyane(*#) 10/09/2015 -
NJ Giles 11/06/2015 31/01/2017
* Independent (#) Non-executive
REGISTERED OFFICE:
7th Floor, The Foundry
Cardiff Street
Green Point
8001
POSTAL ADDRESS:
PO Box 51591
Waterfront
8002
AUDITOR:
KPMG Inc. - Registered Auditor
1 Mediterranean Street
Foreshore
Cape Town
8001
South Africa
COMPANY SECRETARY:
NAME DATE OF APPOINTMENT DATE OF RESIGNATION
N Muller 23/03/2016 30/09/2016
G MacLachlan 01/11/2016 -
COMPANY REGISTRATION NUMBER:
2007/025416/06
COMMENTARY OF THE DIRECTORS
FOR THE SIX MONTHS ENDED 31 MARCH 2017
HIGHLIGHTS
- Assets under management and administration of R159 billion (31 March 2016: R146 billion).
- Diluted headline earnings per share of 25.70 cents (31 March 2016: 25.76 cents per share).
- Interim dividend per share of 25.00 cents (31 March 2016: 25.00 cents per share).
- Announcement of the acquisition of db X-trackers (RF) Proprietary Limited, subject to regulatory approval.
FINANCIAL RESULTS
The past six-month period to 31 March 2017 has been a difficult one for the financial services industry given the high levels
of political uncertainty in South Africa and the irrational behaviour of international markets following the unexpected political
shifts in Europe and the US. This had a direct impact on our results, as our revenues are driven by the valuation of assets under
management and administration. Furthermore, the strength of the rand in response to strong but indiscriminate inflows of short-
term foreign investments into emerging markets added to a difficult trading environment.
Over the period, the FTSE/JSE All Share Index hit a high of 53 406 and a low of 48 936, eventually returning 1.6% for the period as
domestic headwinds conflicted with international allocations to emerging markets. The JSE All Bond Composite Index delivered
2.8%, the MSCI World Index 8.3% in US dollar terms, and the Rand depreciated to as low as R14.58/USD on 18 November 2016,
with a high of R12.32/USD on 27 March 2017. The cabinet reshuffle, and specifically the recall of Finance Minister Pravin Gordhan,
precipitated a fall from the period high on 27 March 2017 to a closing value of R13.41/USD. Further discussion on the macro
environment that impacts Sygnia is included under the Business Update.
In the context of these demanding conditions, Sygnia's assets under management and administration grew to R159 billion (March
2016: R146 billion) with revenue growing by 12% to R147.5 million (31 March 2016: R131.4 million). Net inflows over the 12-month
period since 31 March 2016 amounted to R2.1 billion.
Sygnia's profit after tax decreased marginally by 2% to R34.3 million (31 March 2016: R34.9 million). This was due to a number
of factors, but was highlighted by a slight decline in operational leverage as revenue increased by 12% and costs increased by
approximately 20%. The most significant line item increase in expenses was associated with staff costs, which increased in line
with the increase in the staff complement from 121 to 179 staff members. This increase in staff included a strengthening in the
executive team and a significant addition to the administrative payroll base following the acquisition of the Gallet Group in 2016,
which enabled Sygnia to enter the umbrella fund market.
Other significant cost increases came from the increased advertising and marketing costs incurred in raising the Group's profile.
These costs have an immediate negative impact on earnings, but it is strongly believed that the Group has raised its profile within
the industry and that its reputation as a market disruptor has grown significantly. This was a stated objective at the time of listing.
In addition, the overall cost base has grown in line with the growth in business capacity in order to prepare for future expansion.
More details relating to this are included in the Business Update that follows the Financial Results commentary.
For the six-month period the revenue derived from asset management activities amounted to 71.6% of total revenue, while that
from institutional investment administration to 11.3% and from employee benefits administration to 8.4%. Other revenue included
stockbroking, transition management and LISP administration revenue.
Another significant development during the period was the announcement of the purchase of the entire issued share capital of db
X-trackers (RF) Proprietary Limited ("DBX"). The Group announced on 30 March 2017 that it would purchase DBX for an amount of
R325 million, initially funded by a bridge loan, to be replaced by a rights issue. The transaction is subject to regulatory approval by
the Registrar of Collective Investments and the Competition Commission. As at the date of this report these two approvals are still
under review by the relevant regulators, but it is expected that these will be satisfied in the short term. The strategic significance of
this transaction is discussed in more detail under the Business Update.
BUSINESS UPDATE
Sygnia listed on the JSE on 14 October 2015 with the stated objective of growing in a number of core areas, including multi-
management, index-tracking, fund of hedge funds management, investment administration and the umbrella fund market. The
listing was also intended to help Sygnia enhance its public profile, its brand recognition and general awareness among both retail
and institutional investors. The past six months have involved a strong focus on execution in all the key areas identified at the time
of the listing. In addition, Sygnia has continued with its strategy of acquiring complementary businesses that broaden its product
range and client base.
The key highlights of each business area are described below.
INSTITUTIONAL MARKET
Institutional assets under management and administration grew from R135.2 billion as at 31 March 2016 to R148.5 billion as at 31
March 2017. Institutional assets acquired but not yet reflecting in the AUM as at 31 March 2017 amount to R4.6 billion.
The institutional market in South Africa continues to shrink in response to weak economic fundamentals, low job creation, lack
of corporate investment and continuing retrenchments as a primary mechanism for cost-cutting. Consequently we continue to
experience net outflows from large retirement funds on our platforms, discontinuation or reduction in service requirements to cut
costs, and more pressure on fees in response to single-digit investment returns. On the positive side we continue to attract new
administration appointments, with a specific focus on retirement funds of at least R1 billion in size, as well as assets into our multi-
manager, index-tracking and fund of hedge funds product ranges.
The recognition of index tracking as a sound strategy for managing assets is growing. Although inflows continue to be small
relative to actively managed mandates, the focus on low fees and the underperformance by many active equity managers of
their benchmarks is beginning to result in an increased interest in passive fund management from boards of trustees. This is
particularly visible in terms of international investments, which make up, on average, 25% of the assets of a retirement fund. Our
assets under management in index-tracking funds grew from R10.3 billion as at 31 March 2016 to R17.3 billion as at 31 March 2017.
We are also well positioned to benefit from the continuing consolidation of stand-alone retirement funds into umbrella funds. Over
the past six months we have built up a significant administrative capacity to take on new clients as the recognition and awareness
of the Sygnia Umbrella Retirement Funds (SURF) grows. Our low-cost proposition, market-leading benefit design and leading-edge
technology are clear market differentiators. SURF was launched on 1 May 2016 and has grown from R1.2 billion in asset size to R2.4
billion over the period to 31 March 2017 (R424 million awaits regulatory approval for transfer). Another R838 million is due to flow
into SURF between 1 April 2017 and 30 June 2017. We expect SURF to continue growing by attracting stand-alone retirement fund
clients and by taking market share from competitors. In the short term the set up costs of SURF, in terms of systems development
and staff expansion (which included the launch of a Durban office) have been a major contributor to Sygnia's expenses. We will also
continue to look for strategic acquisitions to grow SURF at a faster pace.
Despite a challenging investment environment, the Sygnia Signature product range continued to perform well relative to its multi-
manager peers:
- Based on their respective risk categories in the Alexander Forbes Multi-Manager WatchTM Survey to 31 March 2017, our flagship
risk-profiled multi-manager products ranked as follows in terms of returns: Sygnia Signature 40, 50 and 60 Funds ranked
second over three years and first over five years and Sygnia Signature 70 Fund ranked first over three years and third over five
years.
- When compared to the performance of single asset managers as published in the Alexander Forbes Global Large Manager
WatchTM Survey to 31 March 2017, the Sygnia Signature 70 Fund ranked third over three years and five years. The significance of
this lies in that multi-manager products can compete directly with single asset managers' products for top-level performance
and can offer a compelling alternative to the self-selection of single asset managers for retirement funds.
RETAIL MARKET
Retail assets under management grew from R10.6 billion as at 31 March 2016 to R11.6 billion as at 31 March 2017. Assets under
administration on our LISP grew from R4.3 billion as at 31 March 2016 to R6.0 billion as at 31 March 2017, with client numbers
growing from 4 907 to 7 138.
Similar to the institutional market, retail investors are increasingly becoming aware of the impact of cost on their investment
outcomes. Consequently, Sygnia's low-cost savings products and passively managed investment funds offer an increasingly viable
alternative to actively managed unit trusts.
We also launched innovative products like the Sygnia 4th Industrial Revolution Global Equity Fund and the Sygnia ForLife Annuity –
both first products of their kind in South Africa – which give us access to a broader spectrum of investors.
On the performance front our funds continue to perform well:
- The Sygnia Skeleton Balanced 70 Fund, a passively managed high-equity multi-asset-class unit trust, ranked 26th out of 111 unit
trusts*, most of them actively managed, in the South African – Multi-Asset – High Equity category since its inception in October
2013 to March 2017.
- The Sygnia SWIX Index Fund, a passively managed equity unit trust, ranked 27th out of 118 unit trusts*, most of them actively
managed, in the South African – Equity – General category since its inception in October 2013 to March 2017.
- The Sygnia Top 40 Index Fund, a passively managed equity unit trust, ranked 4th 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 March 2017.
*Source: MoneyMate
MARKETING AND ADVERTISING STRATEGY
In order to increase the visibility and recognition of the Sygnia brand among the retail public we have embarked on a fairly
extensive advertising campaign, which includes the use of print and digital media, MyCiti buses and radio advertising. This has had
a disproportionate effect on our expenses, but we believe that it is an essential strategy to ensure retail-client acquisition. Since
the launch of the campaign six months ago we have seen a significant pick up in direct retail investors utilising our products, as well
as the number of financial advisors signing distribution agreements with us in response to their clients asking to invest with Sygnia.
We expect to continue to advertise as an ongoing business strategy and maintain our level of expenditure at the same level as in
the past six months for the foreseeable future.
DBX ACQUISITION
From Sygnia's perspective the acquisition of DBX has a number of strategic and financial advantages:
- DBX is the largest provider of ETFs referencing foreign assets in South Africa, with a strong reputation and an established
retail and institutional client base. There are over 30 000 investors investing in these products. The transaction increases the
awareness of the Sygnia brand among those clients.
- The acquisition is instantly earnings-enhancing to Sygnia as the profit after tax of DBX for the 12-month period ended 31
December 2016 was R38.1 million.
- It increases Sygnia's assets under management in passive strategies by R11.4 billion (based on DBX AUM at 31 March 2017),
placing Sygnia in the top two largest passive managers in South Africa.
- It allows Sygnia to enter the ETF market and, once again, disrupt the status quo by lowering the cost of access to ETFs. Over
time Sygnia will expand its range of ETFs to include further domestic and international products. Sygnia is also expanding its
LISP capabilities to encompass the provision of ETFs, helping to attract new retail clients and financial advisors.
- Sygnia has a growing institutional and retail client base which utilises Sygnia's investment products, either directly through
passive solutions, or indirectly through multi-manager products that invest in passive strategies. This transaction allows Sygnia
to offer those clients a broader range of products. Furthermore, any flows into Sygnia's global balanced products will benefit
the DBX ETFs, as these will form the basis for Sygnia's international investment strategies.
- DBX is an established business that will require little effort to incorporate into Sygnia's existing operations.
The DBX acquisition is an important milestone for Sygnia in its quest to becoming a leading provider of passively managed
products in South Africa.
TRANSFORMATION
Sygnia is committed to being a representative South African company. To that effect the company 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 Asset Management is certified as a Level 3 contributor in terms
of the Financial Services Sector Code. Shareholders are advised, however, that the new Draft Amended Financial Services Sector
Code gazetted in March 2016 is substantially more demanding on all financial services companies. This means that Sygnia will
undertake new initiatives to retain an acceptable level of compliance later in 2017. This may include further measures to broaden
its ownership base.
INTERIM 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. 3) for the interim period ended 31 March 2017 of 25 cents per share has been declared
out of retained income, resulting in a net dividend of 20 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: Monday, 12 June 2017
Shares trade ex dividend: Tuesday, 13 June 2017
Record date: Thursday, 15 June 2017
Payment date: Monday, 19 June 2017
Share certificates may not be dematerialised or rematerialised between Tuesday, 13 June 2017, and Thursday, 15 June 2017, both dates
inclusive. Dividends declared after 31 March 2012 are subject to DT, where applicable. In terms of the DT, the following additional
information is disclosed:
- The local DT rate is 20%.
- 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.
EXTERNAL AUDITOR'S REVIEW
The external auditors, KPMG Inc., reviewed the condensed consolidated statement of financial position of Sygnia Limited Group
as at 31 March 2017 and the related condensed consolidated statement of comprehensive income, changes in equity and cash
flows for the period then ended, and other explanatory notes. The review has been conducted in accordance with the International
Standard on Review Engagements 2410.
Magda Wierzycka
Chief Executive Officer
INDEPENDENT AUDITOR'S REVIEW REPORT
ON CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
TO THE SHAREHOLDERS OF SYGNIA LIMITED
We have reviewed the condensed consolidated interim financial statements of Sygnia Limited contained in the accompanying interim
report, which comprise the condensed consolidated interim statement of financial position at 31 March 2017 and the condensed
consolidated interim statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six
months ended 31 March 2017, and selected explanatory notes.
DIRECTORS' RESPONSIBILITY FOR THE INTERIM FINANCIAL STATEMENTS
The Directors are responsible for the preparation and presentation of these interim financial statements in accordance with
International Financial Reporting Standards, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides, as issued by
the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the
requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the
preparation of interim financial information that are free from material misstatement, whether due to fraud or error.
AUDITOR'S RESPONSIBILITY
Our responsibility is to express a conclusion on these interim financial statements. We conducted our review in accordance with
International Standard on Review Engagements (ISRE) 2410, Review of Interim Financial Information Performed by the Independent
Auditor of the Entity. ISRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the
interim financial information are not prepared in all material respects in accordance with the applicable financial reporting framework.
This standard also requires us to comply with relevant ethical requirements.
A review of interim financial information in accordance with ISRE 2410 is a limited assurance engagement. We perform procedures
primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical
procedures, and evaluate the evidence obtained.
The procedures performed in a review are substantially less in scope than and differ in nature from those performed in an audit
conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these interim
financial statements.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated
interim financial statements of Sygnia Limited for the period ended 31 March 2017 are not prepared, in all material respects, in
accordance with International Financial Reporting Standard, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards
Council and the requirements of the Companies Act of South Africa.
KPMG Inc
Registered Auditor
Per GM Pickering
Chartered Accountant (SA)
Director
24 May 2017
CONDENSED CONSOLIDATED INTERIM
STATEMENT OF FINANCIAL POSITION
AT 31 MARCH 2017
REVIEWED REVIEWED AUDITED
31 MARCH 2017 31 MARCH 2016 30 SEPTEMBER 2016
R R R
ASSETS
Intangible assets 32 476 820 2 048 215 32 609 394
Deferred tax assets 3 939 405 3 412 068 4 881 420
Property and equipment 33 450 643 28 881 353 31 130 818
Investments linked to investment contract liabilities 38 924 272 139 32 877 516 210 39 052 873 089
Investments 265 976 817 252 501 147 266 718 900
Loans receivable 11 242 656 11 559 107 11 438 324
Taxation receivable 950 952 4 623 894 994 062
Trade and other receivables 43 775 319 35 479 599 32 417 453
Amounts owing by clearing houses - 22 380 944 -
Amounts owing by clients 27 159 781 11 293 266 171 954 194
Cash and cash equivalents 164 455 152 323 270 788 218 351 424
TOTAL ASSETS 39 507 699 684 33 572 966 591 39 823 369 078
EQUITY
Stated capital 507 728 719 507 728 719 507 728 719
Retained income 131 269 809 126 314 277 131 607 320
Reserves (216 623 161) (218 584 623) (217 849 681)
TOTAL EQUITY 422 375 367 415 458 373 421 486 358
LIABILITIES
Deferred tax liabilities 18 576 112 28 053 239 18 584 382
Investment contract liabilities 37 798 433 918 32 153 983 559 38 182 959 220
Third-party liabilities arising on consolidation of unit trust funds 830 313 574 532 448 903 688 187 295
Taxation payable 450 569 1 023 462 703 873
Trade and other payables 409 970 221 408 323 477 339 106 858
Amounts owing to clearing houses 26 722 510 - 107 751 717
Amounts owing to clients 373 327 33 675 578 64 097 106
Bank overdraft 484 086 - 492 269
TOTAL LIABILITIES 39 085 324 317 33 157 508 218 39 401 882 720
TOTAL EQUITY AND LIABILITIES 39 507 699 684 33 572 966 591 39 823 369 078
CONDENSED CONSOLIDATED INTERIM
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 MARCH 2017
REVIEWED REVIEWED AUDITED
SIX MONTHS SIX MONTHS FOR THE YEAR
31 MARCH 2017 31 MARCH 2016 30 SEPTEMBER 2016
Notes R R R
Revenue 147 482 557 131 390 508 276 248 535
Expenses (113 188 565) (93 727 985) (198 748 684)
Investment contract income 680 086 998 1 789 689 433 2 606 691 940
Transfer to investment contract liabilities (680 086 998) (1 789 689 433) (2 606 691 940)
Interest income 11 113 509 8 590 038 13 432 549
Other investment income 4 369 552 4 069 049 13 391 694
Fair value adjustment to third-party liabilities (1 618 651) (1 699 243) (2 760 139)
PROFIT FROM OPERATIONS 48 158 402 48 622 367 101 563 955
Finance costs - (350 897) (655 299)
PROFIT BEFORE TAX 48 158 402 48 271 470 100 908 656
Income tax expense (13 857 853) (13 354 284) (28 603 927)
TOTAL PROFIT AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD 34 300 549 34 917 186 72 304 729
EARNINGS PER SHARE (CENTS) 6
Basic 26.75 25.83 56.82
Diluted 25.70 25.76 54.15
HEADLINE EARNINGS PER SHARE (CENTS)
Basic 26.75 25.83 56.83
Diluted 25.70 25.76 54.16
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED AT 31 MARCH 2017
STATED COMMON CONTROL GROUP EQUITY SHARE BASED RETAINED TOTAL
CAPITAL RESERVE ADJUSTMENT PAYMENT RESERVE INCOME EQUITY
BALANCE AT 30 SEPTEMBER 2015 - AUDITED 271 210 689 (252 576 998) (307 062) 33 584 073 91 397 091 143 307 793
Total profit for the period - - - - 34 917 186 34 917 186
Total other comprehensive income for the period - - - - - -
Total comprehensive income for the period - - - - 34 917 186 34 917 186
Share issue 237 256 606 - - - - 237 256 606
Share option expense - - - 715 364 - 715 364
Transaction costs on issue of ordinary shares (738 576) - - - - (738 576)
Total transactions with owners 236 518 030 - - 715 364 - 237 233 394
BALANCE AT 31 MARCH 2016 - REVIEWED 507 728 719 (252 576 998) (307 062) 34 299 437 126 314 277 415 458 373
Total profit for the period - - - - 37 387 543 37 387 543
Total other comprehensive income for the period - - - - - -
Total comprehensive income for the period - - - - 37 387 543 37 387 543
Dividends paid - - - - (32 094 500) (32 094 500)
Share option expense - - - 734 942 - 734 942
Total transactions with owners - - - 734 942 (32 094 500) (31 359 558)
BALANCE AT 30 SEPTEMBER 2016 - AUDITED 507 728 719 (252 576 998) (307 062) 35 034 379 131 607 320 421 486 358
Total profit for the period - - - - 34 300 549 34 300 549
Total other comprehensive income for the period - - - - - -
Total comprehensive income for the period - - - - 34 300 549 34 300 549
Dividends paid - - - - (34 638 060) (34 638 060)
Share option expense - - - 1 226 520 - 1 226 520
Total transactions with owners - - - 1 226 520 (34 638 060) (33 411 540)
BALANCE AT 31 MARCH 2017 - REVIEWED 507 728 719 (252 576 998) (307 062) 36 260 899 131 269 809 422 375 367
CONDENSED CONSOLIDATED INTERIM
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 MARCH 2017
REVIEWED REVIEWED AUDITED
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
31 MARCH 2017 31 MARCH 2016 30 SEPTEMBER 2016
R R R
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 48 158 402 48 271 470 100 908 656
Non-cash movements and adjustments to profit before tax (8 139 745) (8 053 779) (8 642 419)
Changes in working capital 59 742 592 149 747 540 127 719 749
Cash utilised by policyholder activities (113 594 182) (5 199 931) (114 468 340)
Dividends received 939 254 467 432 1 276 083
Interest received 11 113 509 9 250 601 12 838 160
Interest paid - (350 897) (655 299)
Taxation paid (13 134 302) (16 525 798) (34 562 809)
NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES (14 914 471) 177 606 638 84 413 781
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (6 755 243) (2 594 790) (8 333 289)
Additions to intangible assets (1 548 805) (1 057 626) (2 362 039)
Net sales/(purchases) of investments 3 968 490 (181 633 173) (179 677 102)
Proceeds on the sale of investments - - 51 037 833
Acquisition of subsidiary, net of cash acquired - - (25 635 784)
Proceeds on disposals of intangible assets - - 2 110 516
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (4 335 558) (185 285 589) (162 859 865)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (34 638 060) - (34 644 500)
Issue of ordinary shares - 237 256 606 237 256 606
Transaction costs on issue of ordinary shares - (738 576) (738 576)
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES (34 638 060) 236 518 030 201 873 530
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (53 888 089) 228 839 079 123 427 446
Cash and cash equivalents at beginning of the period 217 859 155 94 431 709 94 431 709
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 163 971 066 323 270 788 217 859 155
Cash and cash equivalents at the end of the period included 6 765 092 164 120 980 57 598 344
the following cash held on behalf of policyholders and clients.
NOTES TO THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2017
1. REPORTING ENTITY
Sygnia Limited is a company domiciled in the Republic of South Africa. The condensed consolidated interim financial statements
("interim financial statements") as at and for the six months ended 31 March 2017 comprise the company, its subsidiaries and
consolidated unit trust funds (together referred to as "the Group"). The Group is primarily involved in the provision of investment
management and administration-related services.
2. BASIS OF PREPARATION
The interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act 71 of 2008 of
South Africa and the JSE Listings Requirements.
The interim 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 operations and that the realisation of assets and settlement of liabilities,
contingent obligations and commitments will occur in the ordinary course of business.
The interim financial statements are presented in South African Rands, which is the functional currency of the Group.
The interim financial statements have been prepared on the historical cost basis, except for the measurement of certain financial
instruments which are measured at fair value. The principal accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these financial statements.
The condensed consolidated interim financial statements do not include all of the information required for full annual financial
statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended
30 September 2016.
These condensed consolidated interim financial statements have been prepared under the supervision of the Financial Director,
M Buckham CA(SA).
3. ACCOUNTING POLICIES
The accounting policies applied in the preparation of these condensed consolidated interim financial statements conform to IFRS
and are consistent with those accounting policies applied in the preparation of the consolidated financial statements as at and for
the year ended 30 September 2016.
The following new or revised IFRSs and interpretations that are applicable to the Group have effective dates applicable to
future financial years and have not been early adopted:
IFRS 9 – Financial Instruments (effective 1 January 2018)
IFRS 15 – Revenue from Contracts with Customers (effective 1 January 2018)
IFRS 16 - Leases (effective 1 January 2019)
The impact of the application of these revised standards and interpretations in future financial reporting periods on the
Group's reported results, financial position and cash flows will be disclosed in the 30 September 2017 financial statements.
4. USE OF ESTIMATES AND JUDGEMENTS
In preparing these condensed consolidated interim financial statements, 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 2016.
5. 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.
6. EARNINGS AND HEADLINE EARNINGS PER SHARE
REVIEWED SIX REVIEWED SIX AUDITED FOR
MONTHS ENDED MONTHS ENDED THE YEAR
31 MARCH 2017 31 MARCH 2016 30 SEPTEMBER 2016
R R R
Profit attributable to ordinary shareholders 34 300 549 34 917 186 72 304 729
Non-headline items (net of tax)
- Loss on disposal of plant and equipment - - 5 158
HEADLINE EARNINGS 34 300 549 34 917 186 72 309 887
Number of shares issued 137 178 000 137 178 000 137 178 000
Weighted average number of shares (basic) 128 244 834 135 171 536 127 241 602
Weighted average number of shares (diluted) 133 473 584 135 540 954 133 521 950
Weighted average number of shares in issue (adjusted basic) 137 178 000 135 171 536 136 174 768
Weighted average number of shares in issue (adjusted diluted) 138 340 251 136 435 554 137 489 129
EARNINGS PER SHARE CENTS CENTS CENTS
Earnings per share (basic)* 26.75 25.83 56.82
Earnings per share (diluted) 25.70 25.76 54.15
Headline earnings per share (basic) 26.75 25.83 56.83
Headline earnings per share (diluted) 25.70 25.76 54.16
Adjusted headline earnings per share (basic) 25.00 25.83 53.10
Adjusted headline earnings per share (diluted) 24.79 25.59 52.59
Net asset value per share (cents) 329.35 307.36 331.25
Tangible net asset value per share (cents) 300.95 303.32 301.78
*Earnings per share in the comparative reporting period was based on a weighted number of shares that did not correctly take into
account the Ulundi BEE transaction.
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.
7. CORPORATE VS THIRD PARTY FINANCIAL INFORMATION
STATEMENT OF FINANCIAL POSITION
A subsidiary of the Group, Sygnia Life Limited is a linked insurance company and issues linked policies to policyholders (where the
value of policy benefit is directly linked to the fair value of the supporting assets), and as such does not expose the business to the
market risk of fair value adjustments on the financial asset, as this risk is assumed by the policyholder. Sygnia Securities Proprietary
Limited (subsidiary) provides stockbroking services to clients, which results in significant working capital fluctuations due to the
timing of the close of the JSE in terms of client settlements. The unsettled exchange-traded transactions are represented by
money owed to clients and held with the JSE Trustees. Similarly, cash held in settlement accounts on behalf of clients related to the
abovementioned subsidiaries are considered as third party balances.
In order to evaluate the consolidated financial position, the Group segregates the statement of financial position and the statement
of profit or loss and other comprehensive income between corporate (own balances) and third party (client-related balances).
Third party balances represent the investment contract liabilities and related linked client assets of Sygnia Life Limited, the related
portfolio debtors and creditors accounts, deferred taxation, unsettled trades and related bank accounts, as well as third party
liabilities and assets arising on consolidation of unit trust funds. Client balances in Sygnia Securities Proprietary Limited due to
unsettled trades and cash held in settlement accounts on behalf of clients are included in third party balances.
REVIEWED - AS AT 31 MARCH 2017 REVIEWED - AS AT 31 MARCH 2016 AUDITED - AS AT 30 SEPTEMBER 2016
CORPORATE THIRD PARTY CORPORATE THIRD PARTY CORPORATE THIRD PARTY
TOTAL BALANCES BALANCES TOTAL BALANCES BALANCES TOTAL BALANCES BALANCES
R R R R R R R R R
ASSETS
Intangible assets 32 476 820 32 476 820 - 2 048 215 2 048 215 - 32 609 394 32 609 394 -
Deferred tax assets 3 939 405 3 939 405 - 3 412 068 3 412 068 - 4 881 420 4 881 420 -
Property and equipment 33 450 643 33 450 643 - 28 881 353 28 881 353 - 31 130 818 31 130 818 -
Investments linked to investment contract liabilities 38 924 272 139 - 38 924 272 139 32 877 516 210 - 32 877 516 210 39 052 873 089 - 39 052 873 089
Investments 265 976 817 201 046 809 64 930 008 252 501 147 207 534 539 44 966 608 266 718 900 201 626 277 65 092 623
Loans receivable 11 242 656 11 242 656 - 11 559 107 11 559 107 - 11 438 324 11 438 324 -
Taxation receivable 950 952 950 952 - 4 623 894 4 623 894 - 994 062 994 062 -
Trade and other receivables 43 775 319 43 746 919 28 400 35 479 599 35 317 075 162 524 32 417 453 31 108 937 1 308 516
Amounts owing by clearing houses - - - 22 380 944 - 22 380 944 - - -
Amounts owing by clients 27 159 781 - 27 159 781 11 293 266 - 11 293 266 171 954 194 - 171 954 194
Cash and cash equivalents 164 455 152 157 690 060 6 765 092 323 270 788 159 149 808 164 120 980 218 351 424 160 753 080 57 598 344
TOTAL ASSETS 39 507 699 684 484 544 264 39 023 155 420 33 572 966 591 452 526 059 33 120 440 532 39 823 369 078 474 542 312 39 348 826 766
EQUITY
TOTAL EQUITY 422 375 367 422 375 367 - 415 458 373 415 458 373 - 421 486 358 421 486 358 -
LIABILITIES
Deferred tax liabilities 18 576 112 3 033 827 15 542 285 28 053 239 1 179 565 26 873 674 18 584 382 3 042 097 15 542 285
Investment contract liabilities 37 798 433 918 - 37 798 433 918 32 153 983 559 - 32 153 983 559 38 182 959 220 - 38 182 959 220
Third-party liabilities arising on consolidation
of unit trust funds
830 313 574 - 830 313 574 532 448 903 - 532 448 903 688 187 295 - 688 187 295
Taxation payable 450 569 450 569 - 1 023 462 1 023 462 - 703 873 703 873 -
Trade and other payables 409 970 221 58 200 415 351 769 806 408 323 477 34 864 659 373 458 818 339 106 858 48 817 715 290 289 143
Dividend payable - - - - - - - - -
Amounts owing to clients 373 327 - 373 327 33 675 578 - 33 675 578 64 097 106 - 64 097 106
Amount owing to clearing houses 26 722 510 - 26 722 510 - - - 107 751 717 - 107 751 717
Bank overdraft 484 086 484 086 - - - - 492 269 492 269 -
TOTAL LIABILITIES 39 085 324 317 62 168 897 39 023 155 420 33 157 508 218 37 067 686 33 120 440 532 39 401 882 720 53 055 954 39 348 826 766
TOTAL EQUITY AND LIABILITIES 39 507 699 684 484 544 264 39 023 155 420 33 572 966 591 452 526 059 33 120 440 532 39 823 369 078 474 542 312 39 348 826 766
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
In order to evaluate the consolidated comprehensive income of the Group, the Group segregates the statement of profit or loss and other comprehensive income between Corporate transactions
and Third party transactions.
Where consolidation of unit trust funds occurs by virtue of the Group's investment into the fund, the income and expenditure components are disclosed in the statement of profit or loss and other
comprehensive income as well as the third-party share thereof. These amounts are included in Third party transactions.
REVIEWED - SIX MONTHS ENDED 31 MARCH 2017 R EVIEWED - SIX MONTHS ENDED 31 MARCH 2016 AUDITED - YEAR ENDED 30 SEPTEMBER 2016
TOTAL CORPORATE THIRD PARTY TOTAL CORPORATE THIRD PARTY TOTAL CORPORATE THIRD PARTY
R R R R R R R R R
Revenue 147 482 557 147 482 557 - 131 390 508 131 390 508 - 276 248 535 276 248 535 -
Expenses (113 188 565) (112 851 566) (336 999) (93 727 985) (93 466 764) (261 221) (198 748 684) (198 216 838) (531 846)
Investment contract income 680 086 998 - 680 086 998 1 789 689 433 - 1 789 689 433 2 606 691 940 - 2 606 691 940
Transfer to investment contract liabilities (680 086 998) - (680 086 998) (1 789 689 433) - (1 789 689 433) (2 606 691 940) - (2 606 691 940)
Interest income 11 113 509 9 391 813 1 721 696 8 590 038 6 928 681 1 661 357 13 432 549 10 367 280 3 065 269
Other investment income 4 369 552 4 135 598 233 954 4 069 049 3 769 942 299 107 13 391 694 13 164 978 226 716
Fair value adjustment to third-party liabilities (1 618 651) - (1 618 651) (1 699 243) - (1 699 243) (2 760 139) - (2 760 139)
PROFIT FROM OPERATIONS 48 158 402 48 158 402 - 48 622 367 48 622 367 - 101 563 955 101 563 955 -
Finance costs - - - (350 897) (350 897) - (655 299) (655 299) -
OPERATING PROFIT BEFORE TAXATION 48 158 402 48 158 402 - 48 271 470 48 271 470 - 100 908 656 100 908 656 -
Income tax expense (13 857 853) (13 857 853) - (13 354 284) (13 354 284) - (28 603 927) (28 603 927) -
TOTAL PROFIT AND COMPREHENSIVE
INCOME FOR THE PERIOD 34 300 549 34 300 549 - 34 917 186 34 917 186 - 72 304 729 72 304 729 -
8. FAIR VALUE
The fair values of all financial instruments approximate the carrying values reflected in the statement of financial position.
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities.
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
There have been no transfers between level 1, 2 or 3 during the period under review.
The table below analyses financial assets and liabilities, which are carried at fair value, in the statement of financial position. There
were no significant changes in the valuation method and assumptions applied since 30 September 2016.
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
R R R R
REVIEWED FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 31 MARCH 2017
Investments linked to investment contracts 14 551 009 012 24 438 193 135 - 38 989 202 147
Investments (Corporate) 27 699 375 173 347 434 - 201 046 809
14 578 708 387 24 611 540 569 - 39 190 248 956
REVIEWED FINANCIAL liabilities AT FAIR VALUE
THROUGH PROFIT OR LOSS AS AT 31 MARCH 2017
Investment contract liabilities 14 551 009 012 24 077 738 480 - 38 628 747 492
14 551 009 012 24 077 738 480 - 38 628 747 492
AUDITED FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 30 SEPTEMBER 2016
Investments linked to investment contracts 17 148 080 337 21 969 885 375 - 39 117 965 712
Investments (Corporate) 58 146 169 143 480 108 - 201 626 277
17 206 226 506 22 113 365 483 - 39 319 591 989
AUDITED FINANCIAL LIABILITIES AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 30 SEPTEMBER 2016
Investment contract liabilities 17 148 080 337 21 034 878 883 - 38 182 959 220
17 148 080 337 21 034 878 883 - 38 182 959 220
REVIEWED FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 31 MARCH 2016
Investments linked to investment contracts 13 258 727 929 19 618 788 281 - 32 877 516 210
Investments (Corporate) 60 289 285 192 211 862 - 252 501 147
13 319 017 214 19 811 000 143 - 33 130 017 357
REVIEWED FINANCIAL LIABILITIES AT FAIR VALUE
THROUGH PROFIT OR LOSS AS AT 31 MARCH 2016
Investment contract liabilities 13 258 727 929 18 895 255 630 - 32 153 983 559
13 258 727 929 18 895 255 630 - 32 153 983 559
9. RELATED-PARTY TRANSACTIONS
Related-party transactions similar to those disclosed in the Group's financial statements for the year ended 30 September 2016
took place during the period under review, except for the following:
Share-based options granted to directors
On 20 February 2017, Sygnia Limited made an offer, in terms of the employee share option scheme, to M Buckham to acquire
315 493 ordinary shares at a price of R15.85, which was the 30-day Volume Weighted Average Price of Sygnia Limited as at the date
of offer.
10. EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any matter or circumstances, other than those listed below, arising since the end of the financial
period, not otherwise dealt with in the interim financial statements, which significantly affect the financial position of the Group or
the results of its operations.
DB X-TRACKER ACQUISITION
Sygnia announced on 30 March 2017 that they had concluded a sale agreement with Deutshe Bank whereby Sygnia would
purchase the entire issued capital of db X-trackers (RF) Proprietary Limited (DBX) for a consideration of R325 million. The
acquisition would be funded by a bridge loan from Nedbank which would be replaced by cash raised from a rights offer. The
acquisition is subject to regulatory approval from the Registrar of Collective Investments and the Competition Commission which,
at the time of this report, had not yet been granted. It is expected that the approvals will be granted in the short term, following
the publication of these interim financial results.
DBX is a Collective Investment Schemes management company that offers a range of exchange-traded funds ("ETFs") listed on the
JSE Limited ("the JSE"), referencing offshore assets.
As at the end of March 2017, the AUM of DBX was R11.4 billion across five different listed ETFs. Further details relating the rationale
associated with the transaction have been included in the Business Update.
As at the reporting date there was no financial impact associated with the transaction.
INTERIM DIVIDEND
The board approved and declared a gross interim dividend of 25 cents per share on 24 May 2017 from retained income for the six
months ended 31 March 2017.
24 May 2017
SPONSOR: NEDBANK CORPORATE
AND INVESTMENT BANKING
Cape Town
7th Floor, The Foundry
Cardiff Street
Green Point
8001
South Africa
T: +27(0) 21 446 4940
F: +27(0) 21 446 4950
E: info@sygnia.co.za
Johannesburg
Unit 40, 6th Floor
Katherine and West building
West Street
Sandton
2196
T: +27 (0) 10 595 0550
F: +27 (0) 86 206 5173
E: info@sygnia.co.za
DURBAN
Office 2, 2nd Floor
Ridgeview
1 Nokwe Avenue
Ridgeside
Umhlanga Ridge
4319
T: +27 (0) 31 001 0650
F: +27 (0) 86 206 4421
E: info@sygnia.co.za
www.sygnia.co.za
Date: 24/05/2017 03:49:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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