SYGNIA LIMITED - Reviewed condensed consolidated financial statements for the six months ended 31 March 2018

Release Date: 25/05/2018 10:00
Code(s): SYG
 
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'). 
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