Wrap Text
Reviewed condensed consolidated financial statements for the six months ended 31 March 2018
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
Reviewed Condensed Consolidated Financial Statements
For the six months ended 31 March 2018
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
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
* Independent # Non-executive
Registered office:
7th Floor, The Foundry
Cardiff Street
Green Point
8001
Postal address:
PO Box 51591
Waterfront
8002
Auditor:
Deloitte & Touche
1st Floor, The Square
Cape Quarter
27 Somerset Road
Green Point
8005
Company secretary:
G MacLachlan Appointed: 01/11/2016
Company registration number:
2007/025416/06
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 2
Contents
Commentary of the directors 4
Independent auditor’s review report on interim financial statements 9
Condensed consolidated statement of financial position 11
Condensed consolidated statement of profit or loss and other comprehensive income 12
Condensed consolidated statement of changes in equity 13
Condensed consolidated statement of cash flows 14
Notes to the condensed consolidated interim financial statements 15
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3
Commentary of the directors
For the period ended 31 March 2018
Highlights
• Assets under management and administration of R180.6 billion as at 31 March 2018 (2017: R158.9 billion), up
14%
• Revenue of R207.3 million (2017: R147.5 million), up 41%
• Operating profit (before tax and finance charges) of R64.0 million (2017: R48.2 million), up 33%
• Profit after tax of R37.0 million (2017: R34.3 million), up 8%
• Headline earnings per share of 25.34 cents (2017: 26.23 cents) and diluted headline earnings per share of
24.72 cents (2017: 25.40 cents)
• Total dividend per share of 25.00 cents (2017: 25.00 cents)
Business update
The past six months have been characterised by a difficult trading environment for cyclical businesses, with highly
volatile market conditions combined with a strong rand leading to near flat returns for investors. The FTSE/JSE All
Share Index delivered a return of 1.0% and the JSE All Bond Index 10.5%, FTSE/JSE SA Listed Property Index -
12.9%, while the rand strengthened by 12.7% relative to the US dollar, leading to negative returns from
international investments.
Despite the difficult market conditions, Sygnia’s operational performance has remained strong, with net operating
profit for the period (before tax, finance charges and investment income) up 104.9%. Assets under management
and administration (AUM) have increased to R180.6 billion as at 31 March 2018 (2017: R158.9 billion). Institutional
assets secured, but not yet reflected in AUM, amount to R14.2 billion. We have also placed a focus on managing
expenses relative to revenue, with revenue up 40.6% and expenses up 21.1%.
Institutional market
The volatility in the markets has meant that institutional investors have become increasingly nervous about their
investment strategies, which has translated into few retirement funds making changes in their asset manager
appointments. At the same time, the issue of costs has become a key consideration. Sygnia has benefitted from
that trend in the form of a strong growth in its AUM where the strategies are passive in nature. Assets managed on
a passive basis have grown to R32.6 billion (2017: R17.3 billion). Institutional passively-managed assets secured,
but not yet reflected in AUM, amount to R2 billion.
Sygnia is the largest manager of exchange traded funds (ETFs) listed on the JSE, with AUM of R15.8 billion as at
31 March 2018. We have expanded our product range in the past six months by launching additional international
ETFs, including the Sygnia Itrix 4th Industrial Revolution Global Equity ETF, the Sygnia Itrix S&P 500 ETF and the
Sygnia Itrix Global Property ETF, as well as two domestic ETFs, the Sygnia SWIX 40 ETF and the Sygnia Top 40
ETF.
A new range of institutional products has been launched to take into account the varied needs of our retirement
fund clients. This includes a unique smoothed return product, which should find appeal among investors worried
about increasing market volatility, as well as a range of multi-asset-class products based on splitting assets
between balanced mandates offered by leading asset management houses in South Africa. This complements our
existing multi-manager product range based on specialist mandates.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
We have also secured a number of large investment administration appointments, as retirement funds increasingly
recognise the benefits of consolidating their investments on multi-manager platforms. New assets secured and
received on that basis over the past six months have equaled R8 billion. A further R12.2 billion has been secured
but not yet received. This does mean that our capital requirements have grown accordingly. We lost one large
investment administration appointment in respect of AUM, however it only generated 0.02% p.a. in administration
fees and therefore had minimal impact on revenue.
The Sygnia Umbrella Retirement Funds (SURF) have continued to attract assets and clients. The number of
participating employers has risen to 199 as at 31 March 2018 (2017: 165) with a combined membership of 15 392
(2017: 9 528). An additional 17 clients, comprising 9 000 members, are in the process of transferring to SURF,
taking the overall membership to approximately 24 000 members. Most significantly, the AUM in SURF stood at
R3.2 billion as at 31 March 2018 (2017: R1.6 billion), with an additional R1.6 billion in the process of transfer,
bringing the total to R4.8 billion. Given the recent Budget 2017/18 requirement that the number of stand-alone
retirement funds reduce from the current 1 560 to 200, we continue to believe that SURF has been a correct long-
term business strategy.
Retail market
Sygnia’s low-cost unit trusts and an advanced administration platform have continued to attract assets and clients.
The retail AUM has grown to R24.1 billion as at 31 March 2018 (2017: R11.6 billion), with assets on the Linked
Investment Service Provider (LISP) platform increasing to R7.3 billion (2017: R6.0 billion). The number of clients on
the platform has risen from 7 138 to 12 403 over the same period.
Our passively managed unit trusts continue to shine in the performance surveys against actively managed peers.
The highlights were:
• The Sygnia Skeleton Balanced 70 Fund, a passively managed high-equity multi-asset class unit trust, ranked
15th out of 97 unit trusts*, most of them actively managed, in the South African – Multi-Asset – High Equity
category since its inception in October 2013 to March 2018.
• The Sygnia SWIX Index Fund, a passively managed equity unit trust, ranked 15th out of 107 unit trusts*, most
of them actively managed, in the South African – Equity – General category since its inception in October 2013
to March 2018.
• The Sygnia Top 40 Index Fund, a passively managed equity unit trust, ranked 3rd 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 2018.
*Source: MoneyMate
Stockbroking operations
Sygnia Securities Proprietary Limited (Sygnia Securities) has seen significant growth in transaction volumes on the
back of a number of large transition management appointments, as well as inflows into Sygnia’s index-tracking
products. We expect that growth to continue.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5
Strategy for 2018/19
We have spent the past six months actively researching a number of new strategic initiatives that will position
Sygnia for the evolving digital future, as well as help its new business development and distribution efforts.
The key initiatives planned for 2018 and 2019 are:
• We are in the process of rolling out a revolutionary new retail distribution model which should result in
significant asset flows into Sygnia’s retail products. This model will be expanded offshore in 2019.
• We aim to launch SygniaCoin, a cryptocurrency exchange, in the third quarter of 2018. The cryptocurrency
market is evolving at a rapid pace internationally and domestically, and is attracting both domestic and
international flows. With its fintech focus, Sygnia is well-positioned to become the first major financial services
institution to embrace cryptocurrencies and to offer investors a secure trading and execution platform backed
by an international infrastructure, well-designed custody and integration with standard savings products. The
regulation around cryptocurrency exchanges is likely to evolve. The 2018/19 Budget defined cryptocurrencies
as “digital assets that may be used as a medium of exchange”. The South African Revenue Service (SARS)
has already indicated that trading and investing in cryptocurrencies are subject to tax. We expect further
regulatory frameworks to follow. To ensure the highest levels of integrity and security for clients, we are basing
our policies, protocols and processes on existing regulatory framework applicable to cryptocurrency exchanges
registered in New York State, USA. We will also be able to offer investors the option of holding
cryptocurrencies on the Sygnia Alchemy administration portal, alongside their investments through the Sygnia
LISP and in SURF.
• We intend to significantly upgrade our retail infrastructure which, although capital intensive, will, over the next
three years, result in a significant reduction in costs, enhance scalability and provide us with opportunities to
expand our operations offshore. We have also embarked on extensive upgrades to the infrastructure of Sygnia
Securities and expanding its range of activities to take advantage of stock lending, market-making and third-
party execution opportunities. We believe that this has the potential to significantly enhance our profitability
going forward.
• A range of new products has also been designed to cater to the growing needs of our retail and institutional
investors. This includes a range of Shari’ah investment funds, a Sygnia Cryptocurrency Fund that invests in a
range of cryptocurrencies on behalf of investors, and a Sygnia Activist Fund that will capitalise on Sygnia’s
activist stance. We believe that South African asset managers have become too complacent about the
corporate activities of JSE-listed companies. We intend to invest in companies that provide opportunities to
unlock significant value by positive engagement with management.
Transformation
Sygnia remains committed to being a representative South African company that embraces diversity, promotes
transformation and embodies the principles of the Financial Sector Code. Given the more stringent requirements of
the new Financial Sector Code, however, alongside other financial services firms, Sygnia is likely to suffer a decline
in its rating and will need to redesign some of its business strategies to retain an acceptable level of compliance
while working on improving that rating over time.
Financial results
Sygnia’s revenue in the interim financial period to 31 March 2018 grew by 41% to R207.3 million (2017: R147.5
million). The growth in revenue was primarily a result of a growth in existing AUM through organic client growth and
new client flow, a strong performance from Sygnia Securities in generating execution income, and the enhanced
revenue stream from Sygnia Itrix (RF) Proprietary Limited (Sygnia Itrix) that reflected for the full period ended 31
March 2018.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6
Total expenses, at R137.0 million, rose by 21.1% (2017: R113.2 million). Expenditure was at an increased level
primarily as a result of additional expenses from Sygnia Itrix, which included administration and index-tracking fees.
Additional expenditure growth came in the form of higher staff costs as a result of an increased staff complement,
especially with the strengthening in the executive structure in comparison to the prior period, but many of the other
operational costs were well managed in a period of increased business activity. Marketing costs constituted a
significant spend, although these were still well contained, especially considering the broadened exposure of the
Sygnia brand over the last interim financial period.
Although operational costs were very much in line with the prior period (aside from the added cost base due to the
acquisition of Sygnia Itrix) the Group is currently preparing for the implementation of a number of key initiatives,
which will require additional expenditure on technology solutions to ensure that Sygnia continues to offer leading
fintech solutions in its delivery to clients.
Finance costs incurred during the period amounted to R8.0 million, which were a direct result of the costs incurred
on funding extended to the Group by Nedbank for the acquisition of Sygnia Itrix.
The Group incurred a loss on invested capital during the period under review. The loss was a result of volatile
markets during the period as well as a strong appreciation in the rand, which resulted in a loss on the high
proportion of rand-hedged investments held. This investment loss was atypical for the Group but had an impact on
overall group profitability.
Overall, net operating profit before tax and finance charges increased by 33% to R64.0 million (2017: R48.2
million), which reflects a strong operational performance. Net profit after tax increased by 8% to R37.0 million
(2017: R34.3 million). The muted net profit after tax in comparison to the strong performance in operational
earnings is attributable to the investment losses over a difficult period of volatility.
Basic earnings per share for the interim period ended 31 March 2018 decreased by 3.4% to 25.34 cents (2017:
26.23 cents). There were no headline earnings adjustments and therefore headline earnings per share were the
same as basic earnings per share. The decrease in earnings per share, whilst there was an increase in net profit
after tax, is due to the increased weighted average number of shares in issue from 130.8 million shares to 146.0
million shares. The increase in weighted average number of shares is due to the rights offer on 14 August 2017
when 17.8 million shares were issued as partial funding of the acquisition of Sygnia Itrix.
The rights offer price of R9 per share was at an effective discount of R1.50 to the trading price per share of R10.50.
As a result of the discount, an amount of 2.54 million shares have been treated as bonus shares and are reflected
as being in issue since the beginning of the prior reporting period. As a result of the bonus shares the earnings and
headline earnings per share from the interim reporting ended 31 March 2017 of 26.75 cents have been restated to
26.23 cents.
Diluted earnings and headline earnings per share decreased by 2.7% to 24.72 cents (2017: 25.40 cents). As a
result of the bonus shares diluted earnings and headline earnings per share have been restated from 25.70 cents
to 25.40 cents.
At the most recent financial year end, disclosure relating to provisional purchase price allocation valuation (PPAV)
was included. The details of these provisional intangible assets were set out in the notes to the 2017 annual
financial statements. This exercise has not yet been completed, but will be finalised for inclusion in the final results
for 2018. If, at finalisation, the intangible assets are reassessed, the appropriate restatements will be made. There
are no significant income statement effects of the PPA process for the current reporting period.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7
Final 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. 5) for the period ended 31 March 2018 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: Tuesday, 12 June 2018
Shares trade ex dividend: Wednesday, 13 June 2018
Record date: Friday, 15 June 2018
Payment date: Monday, 18 June 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 13 June 2018, and Friday, 15
June 2018, 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 154,955,778.
• Sygnia’s tax reference number is 9334/221/16/6.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8
Independent auditor’s review report on
interim financial statements
To the Shareholders of Sygnia Limited
We have reviewed the condensed consolidated financial statements of Sygnia Limited, contained in the
accompanying interim report, which comprise the condensed consolidated statement of financial position as at 31
March 2018 and the condensed consolidated statement of profit or loss and other comprehensive income, changes
in equity and cash flows for the six-month period then ended, 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 Standard (IAS) 34, Interim Financial Reporting, the SAICA
Financial Reporting Guides, as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by 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
statements 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 statements 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 statements 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 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 financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying
condensed consolidated financial statements of Sygnia Limited for the six-month period ended 31 March 2018 are
not prepared, in all material respects, in accordance with IAS 34, Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
Financial Reporting Standards Council and the requirements of the Companies Act of South Africa.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 9
Deloitte & Touche
Registered Auditor
Per: Brian Botes
Partner
24 May 2018
1st floor, The Square, Cape Quarter
27 Somerset Road, Green Point, Cape Town
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 10
Condensed consolidated statement of
financial position
at 31 March 2018
Reviewed Reviewed Audited
31 March 2018 31 March 2017 30 September 2017
R’000s R’000s R’000s
ASSETS
Intangible assets 353 092 32 477 353 169
Deferred tax assets 9 780 3 939 3 803
Property and equipment 27 947 33 451 29 848
Investments linked to investment contract liabilities 47 606 660 38 924 272 44 204 715
Investments 146 018 265 977 295 936
Loans receivable 10 837 11 243 11 043
Taxation receivable 4 433 951 1 066
Trade and other receivables 74 599 43 775 78 572
Amounts owing by clearing houses - - 14 341
Amounts owing by clients 416 436 27 160 76 537
Cash and cash equivalents 254 749 164 455 312 506
TOTAL ASSETS 48 904 551 39 507 700 45 381 536
EQUITY
Stated capital 665 901 507 729 665 939
Retained income 143 337 131 270 157 474
Reserves (213 664) (216 623) (215 229)
TOTAL EQUITY 595 574 422 376 608 184
LIABILITIES
Deferred tax liabilities 13 556 18 576 12 738
Investment contract liabilities 46 007 717 37 798 434 42 967 589
Third-party liabilities arising on consolidation of unit trust 1 401 408 830 314 1 104 402
funds
Loans payable - - 165 201
Preference share liability 160 000 - -
Taxation payable - 451 8 420
Trade and other payables 309 868 409 970 424 036
Amounts owing to clearing houses 103 418 26 723 -
Amounts owing to clients 313 010 373 90 915
Bank overdraft - 484 51
TOTAL LIABILITIES 48 308 977 39 085 324 44 773 352
TOTAL EQUITY AND LIABILITIES 48 904 551 39 507 700 45 381 536
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 11
Condensed consolidated statement of
profit or loss and other comprehensive
income
for the period ended 31 March 2018
Reviewed for the Reviewed for the Audited for the
six months ended six months ended year ended
31 March 2018 31 March 2017 30 September 2017
Note R’000s R’000s R’000s
Revenue 207 308 147 483 333 143
Expenses (137 032) (113 189) (230 402)
Investment contract income 526 189 680 087 3 486 992
Transfer to investment contract liabilities (526 189) (680 087) (3 486 992)
Interest income 12 820 11 114 21 470
Other investment (loss)/income (19 067) 4 370 14 975
Investment income and fair value adjustment to third-party - - 9 575
assets
Fair value adjustment to third-party liabilities - (1 619) (9 575)
PROFIT FROM OPERATIONS 64 029 48 158 139 186
Finance costs (8 002) - (5 833)
PROFIT BEFORE TAX 56 027 48 158 133 353
Income tax expense (19 029) (13 858) (40 804)
TOTAL PROFIT AND OTHER COMPREHENSIVE
36 998 34 301 92 549
INCOME FOR THE PERIOD
EARNINGS PER SHARE (CENTS) 7
Basic 25.34 26.23* 69.72
Diluted 24.72 25.40* 68.82
* Restated due to impact of the bonus issue component of the rights offer
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 12
Condensed consolidated statement of changes in equity
for the period ended at 31 March 2018
Common Control Group Equity Share-based
Stated Capital Reserve Adjustment Payment Reserve Retained Income Total Equity
R’000s R’000s R’000s R’000s R’000s R’000s
BALANCE AT 1 OCTOBER 2016 - AUDITED 507 729 (252 577) (307) 35 034 131 607 421 486
Total comprehensive income
Total profit and comprehensive income for the period - - - - 34 301 34 301
Total comprehensive income for the period - - - - 34 301 34 301
Transactions with owners
Dividends paid - - - - (34 638) (34 638)
Share option expense - - - 1 227 - 1 227
Total transactions with owners - - - 1 227 (34 638) (33 411)
BALANCE AT 31 MARCH 2017 - REVIEWED 507 729 (252 577) (307) 36 261 131 270 422 376
Total comprehensive income
Total profit and comprehensive income for the period - - - - 58 249 58 249
Total comprehensive income for the period - - - - 58 249 58 249
Transactions with owners
Dividends paid - - - - (32 045) (32 045)
Share issue 160 000 - - - - 160 000
Transaction costs on issue of ordinary shares (1 790) - - - - (1 790)
Share option expense - - - 1 394 - 1 394
Total transactions with owners 158 210 - - 1 394 (32 045) 127 559
BALANCE AT 30 SEPTEMBER 2017 - AUDITED 665 939 (252 577) (307) 37 655 157 474 608 184
Total comprehensive income
Total other comprehensive income for the period - - - - 36 998 36 998
Total comprehensive income for the period - - - - 36 998 36 998
Transactions with owners
Dividends paid - - - - (51 135) (51 135)
Transaction costs on issue of ordinary shares (38) - - - - (38)
Share option expense - - - 1 565 - 1 565
Total transactions with owners (38) - - 1 565 (51 135) (49 607)
BALANCE AT 31 MARCH 2018 - REVIEWED 665 901 (252 577) (307) 39 220 143 337 595 574
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 13
Condensed consolidated statement of
cash flows
for the period ended 31 March 2018
Reviewed for the Reviewed for the Audited for the
six months ended six months ended year ended
31 March 2018 31 March 2017 30 September 2017
R’000s R’000s R’000s
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 56 027 48 158 133 353
Non-cash movements and adjustments to profit before tax 20 500 (8 140) (14 881)
Changes in working capital (110 035) 59 743 77 926
Cash generated/(utilised) by policyholder activities 16 771 (113 594) 23 523
Dividends received 627 939 823
Interest received 12 820 11 114 20 066
Interest paid (8 002) - (323)
Taxation paid (35 974) (13 134) (33 167)
NET CASH (OUTFLOW)/INFLOW FROM
OPERATIVE ACTIVITIES (47 266) (14 914) 207 320
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (2 354) (6 755) (7 544)
Additions to intangible assets (2 068) (1 549) (3 142)
Purchases of investments (283 397) (54 024) (98 598)
Proceeds on the sale of investments 333 753 57 992 98 909
Acquisition of subsidiary, net of cash acquired - - (320 628)
NET CASH INFLOW/(OUTFLOW) FROM INVESTING
ACTIVITIES 45 934 (4 336) (331 004)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (51 135) (34 638) (66 683)
Issue of ordinary shares - - 160 000
Issue of preference shares 160 000 - -
Transaction costs on issue of ordinary shares (38) - (1 790)
(Decrease)/Increase in loans payable (165 201) - 159 692
Post acquisition settlement of pre-acquisition liability - - (32 940)
NET CASH (OUTFLOW)/INFLOW FROM FINANCING
ACTIVITIES (56 374) (34 638) 218 279
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS (57 706) (53 888) 94 595
Cash and cash equivalents at beginning of the period 312 455 217 859 217 859
CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD 254 749 163 971 312 455
Cash and cash equivalents at the end of the period included 54 403 6 765 131 309
the following cash held on behalf of policyholders and clients.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 14
Notes to the condensed consolidated
interim financial statements
for the period ended 31 March 2018
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 2018 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 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 interim 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 2017.
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 and methods of computation 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 2017.
The following new IFRSs that are applicable to the Group have effective dates applicable to future financial years
and have not been early adopted:
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 15
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 standards in future financial reporting periods on the Group’s reported results,
financial position and cash flows will be disclosed in the 30 September 2018 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 2017.
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. Preference share liability
On 31 January 2018 Sygnia Capital Proprietary Limited (Sygnia Capital), a subsidiary within the Sygnia Group,
issued 320 preference shares of R500,000 each to DepFin Investments Proprietary Limited (DepFin), a subsidiary of
Nedbank Limited, for total proceeds of R160 million. The proceeds of the preference shares were applied to settling
the outstanding bridge facility that was in place for the initial funding of the purchase of Sygnia Itrix.
As at 31 March 2018 the preference shares issued by Sygnia Capital have been reflected in the condensed
consolidated statement of financial position as a long-term liability. IAS 32 Financial Instruments: Presentation
defines a financial liability as a contractual obligation to deliver cash or another financial asset to another entity. This
is in contrast with an equity instrument, where the holder has a right to receive dividends or other distributions that
are at the discretion of the issuer. As Sygnia Capital has a fixed contractual obligation to deliver cash to Depfin at a
fixed future date it is clear that the obligation is a liability. The preference dividends are also at a fixed contractual
rate and are contractually payable and therefore the accrued dividends are also reflected as a liability. These
dividends are due within 12 months and are thus reflected in current liabilities.
The preference shares carry a dividend of 78% of the prime rate of interest in South Africa and are payable within
five days of Sygnia Capital receiving a dividend from Sygnia Itrix, which is a wholly owned subsidiary of Sygnia
Capital. The dividends are cumulative. The accrued dividends at 31 March 2018 amount to R2.1 million.
The preference shares are redeemable, in full, three years and one day after the issue date (i.e. on 1 February
2021). Sygnia Capital is also required to maintain a redemption reserve account in which it must deposit, and cede to
DepFin, R10 million six months after the issue date, R22 million 18 months after the issue date and R32 million 30
months after the issue date.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 16
The preference shares are secured by guarantees from Sygnia Asset Management Proprietary Limited, Sygnia
Financial Services Proprietary Limited and Sygnia Alchemy Proprietary Limited, as well as pledges by Sygnia
Limited of its shares in Sygnia Capital and a pledge of Sygnia Capital’s shares in Sygnia Itrix.
7. Earnings and headline earnings per share
Reviewed for the Reviewed for the Audited for the
six months ended six months ended year ended
31 March 2018 31 March 2017 30 September 2017
R’000s R’000s R’000s
Profit attributable to ordinary shareholders 36 998 34 301 92 549
Non-headline items (net of tax) - - -
HEADLINE EARNINGS 36 998 34 301 92 549
Number of ordinary shares issued 154 955 778 137 178 000 154 955 778
Weighted average number of shares (basic) 146 022 612 130 784 517 132 746 682
Weighted average number of shares (diluted) 149 681 172 135 058 930 134 485 028
EARNINGS PER SHARE CENTS CENTS* CENTS
Earnings per share (basic) 25.34 26.23 69.72
Earnings per share (diluted) 24.72 25.40 68.82
Headline earnings per share (basic) 25.34 26.23 69.72
Headline earnings per share (diluted) 24.72 25.40 68.82
Net asset value per share 407.86 322.96 458.15
Tangible net asset value per share 166.06 298.12 192.11
* Restated due to impact of the bonus issue component of the rights offer
8. Corporate vs third party financial information
Condensed consolidated 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 condensed consolidated financial
position, the Group segregates the condensed consolidated statement of financial position and the condensed
consolidated statement of profit or loss and other comprehensive income between corporate (own balances) and
third party (client-related balances).
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 17
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.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 18
Condensed consolidated statement of financial position
Reviewed for the six months ended Reviewed for the six months ended Audited for the year ended
31 March 2018 31 March 2017 30 September 2017
Corporate Third-party Corporate Third-party Corporate Third-party
Total balances balances Total balances balances Total balances balances
R’000s R’000s R’000s R’000s R’000s R’000s R’000s R’000s R’000s
ASSETS
Intangible assets 353 092 353 092 - 32 477 32 477 - 353 169 353 169 -
Deferred tax assets 9 780 9 780 - 3 939 3 939 - 3 803 3 803 -
Property and equipment 27 947 27 947 - 33 451 33 451 - 29 848 29 848 -
Investments linked to investment
contract liabilities 47 606 660 - 47 606 660 38 924 272 - 38 924 272 44 204 715 - 44 204 715
Investments 146 018 146 018 - 265 977 201 047 64 930 295 936 214 773 81 163
Loans receivable 10 837 10 837 - 11 243 11 243 - 11 043 11 043 -
Taxation receivable 4 433 4 433 - 951 951 - 1 066 1 066 -
Trade and other receivables 74 599 73 601 998 43 775 43 747 28 78 572 66 324 12 248
Amounts owing by clearing houses - - - - - - 14 341 - 14 341
Amounts owing by clients 416 436 - 416 436 27 160 - 27 160 76 537 - 76 537
Cash and cash equivalents 254 749 200 346 54 403 164 455 157 690 6 765 312 506 181 196 131 309
TOTAL ASSETS 48 904 551 826 054 48 078 497 39 507 700 484 544 39 023 155 45 381 536 861 222 44 520 314
EQUITY
TOTAL EQUITY 595 574 595 574 - 422 376 422 376 - 608 184 608 184 -
LIABILITIES
Deferred tax liabilities 13 556 7 758 5 798 18 576 3 034 15 542 12 738 7 358 5 380
Investment contract liabilities 46 007 717 - 46 007 717 37 798 434 - 37 798 434 42 967 589 - 42 967 589
Third-party liabilities arising on
consolidation of unit trust funds 1 401 408 - 1 401 408 830 314 - 830 314 1 104 402 - 1 104 402
Loans payable - - - - - - 165 201 165 201 -
Preference share liability 160 000 160 000 - - - - - - -
Taxation payable - - - 451 451 - 8 420 8 002 418
Trade and other payables 309 868 62 722 247 146 409 970 58 200 351 770 424 036 72 427 351 609
Amounts owing to clients 313 010 - 313 010 373 - 373 90 915 - 90 915
Amounts owing to clearing houses 103 418 - 103 418 26 723 - 26 723 - - -
Bank overdraft - - - 484 484 - 51 51 -
TOTAL LIABILITIES 48 308 977 230 480 48 078 497 39 085 324 62 169 39 023 155 44 773 352 253 038 44 520 314
TOTAL EQUITY AND LIABILITIES 48 904 551 826 054 48 078 497 39 507 700 484 545 39 023 155 45 381 536 861 222 44 520 314
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 19
Condensed consolidated 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 for the six months ended Reviewed for the six months ended Audited for the year ended
31 March 2018 31 March 2017 30 September 2017
Total Corporate Third-party Total Corporate Third-party Total Corporate Third-party
R’000s R’000s R’000s R’000s R’000s R’000s R’000s R’000s R’000s
Revenue 207 308 207 308 - 147 483 147 483 - 333 143 333 143 -
Expenses (137 032) (137 032) - (113 189) (112 852) (337) (230 402) (230 402) -
Investment contract income 526 189 - 526 189 680 087 - 680 087 3 486 992 - 3 486 992
Transfer to investment contract
liabilities (526 189) - (526 189) (680 087) - (680 087) (3 486 992) - (3 486 992)
Interest income 12 820 12 820 - 11 114 9 392 1 722 21 470 21 470 -
Other investment income (19 067) (19 067) - 4 370 4 136 234 14 975 14 975 -
Investment income and fair value
adjustment to third-party assets - - - - - - 9 575 - 9 575
Fair value adjustment to third-party
liabilities - - - (1 619) - (1 619) (9 575) - (9 575)
Profit from operations 64 029 64 029 - 48 158 48 158 - 139 186 139 186 -
Finance costs (8 002) (8 002) - - - - (5 833) (5 833) -
Profit before tax 56 027 56 027 - 48 158 48 158 - 133 353 133 353 -
Income tax expense (19 029) (19 029) - (13 858) (13 858) - (40 804) (40 804) -
Total profit and other comprehensive
income for the period 36 998 36 998 - 34 301 34 301 - 92 549 92 549 -
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 20
9. Fair value
The fair values of all financial instruments approximate the carrying values reflected in the condensed consolidated
statement of financial position.
Fair value measurements recognised in the condensed consolidated 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).
Valuation techniques and main assumptions used in determining the fair value of financial assets and liabilities
classified within Level 1 and Level 2 can be summarised as follows:
Instrument Valuation Technique Main Assumption
Collective investment schemes Quoted exit price provided by the fund Not applicable – prices are publicly
manager available
Debentures Quoted net asset value provided by Not applicable – underlying asset values
the fund manager are publicly available
Hedge funds Quoted net asset value provided by Not applicable – underlying asset values
the fund manager are publicly available
Investments in insurance policies Prices are obtained from the insurer Not applicable – prices provided by
of the particular investment contract registered long-term insurers
Investment contract liabilities Current fair value of underlying financial Not applicable
asset that is linked to the liability
Investment contract portfolio Current fair value of underlying financial Not applicable
debtors and accrued interest asset that is linked to the debtor
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).
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 21
9. Fair value (cont)
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
R’000s R’000s R’000s R’000s
REVIEWED FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 31 MARCH 2018
Investments linked to investment contracts 20 704 233 26 902 427 - 47 606 660
Investments (Corporate) 2 893 143 125 - 146 018
20 707 126 27 045 552 - 47 752 678
REVIEWED FINANCIAL LIABILITIES AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 31 MARCH 2018
Investment contract liabilities 20 704 233 26 704 892 - 47 409 125
20 704 233 26 704 892 - 47 409 125
AUDITED FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 30 SEPTEMBER 2017
Investments linked to investment contracts 18 109 226 26 095 489 - 44 204 715
Investments (Corporate) 889 295 047 - 295 936
18 110 115 26 390 536 - 44 500 651
AUDITED FINANCIAL LIABILITIES AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 30 SEPTEMBER 2017
Investment contract liabilities 18 109 226 26 095 489 - 44 204 715
18 109 226 26 095 489 - 44 204 715
REVIEWED FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 31 MARCH 2017
Investments linked to investment contracts 14 551 009 24 438 193 - 38 989 202
Investments (Corporate) 27 699 173 347 - 201 046
14 578 708 24 611 540 - 39 190 248
REVIEWED FINANCIAL LIABILITIES AT FAIR VALUE THROUGH
PROFIT OR LOSS AS AT 31 MARCH 2017
Investment contract liabilities 14 551 009 24 077 738 - 38 628 747
14 551 009 24 077 738 - 38 628 747
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 22
10. Related-party transactions
Related-party transactions similar to those disclosed in the Group’s financial statements for the year ended 30
September 2017 took place during the period under review, except for the following:
Share-based options granted to directors
On 4 December 2017 Sygnia Limited made an offer, in terms of the employee share option scheme, to G
MacLachlan, the Group Company Secretary, to acquire 50 000 ordinary shares at a price of R11.05, which was the
30-day Volume Weighted Average Price of Sygnia Limited as at the date of offer.
There were no other share-based options offered to directors of Sygnia Limited during the period under review.
11. Events subsequent to the reporting date
The directors are not aware of any matters or circumstances arising since the end of the financial period, not
otherwise dealt with in the condensed consolidated financial statements, that significantly affect the financial
position of the Group or the results of its operations.
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 23
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”)
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
25 May 2018
SYGNIA LIMITED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 24
Date: 25/05/2018 10:00:00 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
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.