SYGNIA LIMITED - Audited summarised consolidated financial statements for the year ended 30 September 2018

Release Date: 30/11/2018 09:00
Code(s): SYG
Wrap Text
Audited summarised consolidated financial statements for the year ended 30 September 2018

ISIN CODE: ZAE000208815



SYGNIA HIGHLIGHTS                                                                             2
GENERAL INFORMATION                                                                           2
DIRECTORS’ COMMENTARY                                                                         3


 Assets under management and                  Year                  Number of staff
  administration (R billion)

              223                             2018                         213

              184                             2017                         181

              158                             2016                         175

              137                             2015                         127

              113                             2014                         106

               99                             2013                          81

               83                             2012                          57

               70                             2011                          46

               52                             2010                          38

               40                             2009                          34

              4.5                             2008                          24

              4.7                             2007                          20


NATURE OF BUSINESS AND         Sygnia Limited and its subsidiaries (“the Group”) is a
PRINCIPAL ACTIVITIES           specialist financial services group headquartered in South
                               Africa and listed on the Johannesburg Stock Exchange (“JSE”)
                               and A2X Market. The Group focuses on the provision of
                               investment management and administration solutions to
                               institutional and retail clients predominantly located in
                               South Africa.


DIRECTORS                      MF Wierzycka (CEO)
                               HI Bhorat (Chairman) #
                               MH Jonas (Appointed: 1 September 2018) *#
                               DR Hufton (Appointed: 1 September 2018)
                               M Buckham (Financial Director)
                               KT Hopkins *#
                               SA Zinn (Lead Independent) *#
                               IK Moyane *#
                               * Independent # Non-executive

REGISTERED OFFICE              The Foundry
                               7th Floor
                               Cardiff Street
                               Green Point
                               Cape Town

POSTAL ADDRESS                 PO Box 51591

AUDITOR                        Deloitte & Touche
                               1st Floor, The Square
                               Cape Quarter
                               27 Somerset Road
                               Green Point

COMPANY SECRETARY              G MacLachlan       Appointed: 1 November 2016




-   Assets under management and administration of R222.6 billion as at 30 September
    2018 (2017: R184.3 billion), up 20.7%.
-   Revenue of R421.9 million (2017: R333.1 million), up 26.6%.
-   Profit after tax of R101.0 million (2017: R92.5 million), up 9.1%.
-   Headline earnings per share of 69.15 cents (2017: 69.72 cents), down 0.8%, and
    diluted headline earnings per share of 68.42 cents (2017: 68.82 cents), down 0.6%.
-   Total dividend per share of 60.00 cents (2017: 60.00 cents).


The past year has proven to be extremely challenging for all emerging markets,
including South Africa. This has made the trading environment complex to navigate,
particularly for cyclical businesses like Sygnia.

Global and domestic factors
On the domestic front the first quarter ended on a burst of optimism as Cyril
Ramaphosa replaced Jacob Zuma as the president of the ANC. The markets cheered, as
did the rand. This was followed shortly thereafter with the replacement of Zuma as
the President of South Africa, signifying a dawn of a new political era. The rand
touched R11.70 to the US dollar, and the FTSE/JSE All Share Index reached a high of
60 225.

Unfortunately, the “Ramaphoria” was short-lived as global macro-events caught up
with our domestic markets. Strong economic growth in the US, combined with tax
breaks which provided an unexpected boost to corporate earnings, led to the lowest
unemployment figures in recorded history, and an associated uptick in inflation,
spurring the US Federal Reserve to continue increasing interest rates. This, in
turn, reversed the investment flows into emerging markets, with foreigners selling
off bonds and equities in an almost indiscriminate manner. Macroeconomics aside,
volatility increased as US President Donald Trump took a baseball bat to global
trade relationships with the imposition of trade tariffs on aluminium and steel,
promising more to come. His main target was China which has enjoyed a US$30 billion
a month trade surplus with the US for many years. Although the move was initially
interpreted as a negotiating tactic, it soon became apparent that this was a
strategy. Upsetting global trade relations has meant that all major institutions,
such as the IMF and the World Bank, cut their forecasts for global growth for 2018.
Risk appetite evaporated at a rapid pace. Oil prices shot up on geopolitical risks,
including the US’s withdrawal from the landmark 2015 nuclear deal agreed between
Iran and world powers and re-imposition of sanctions, as well as the complete
collapse of Venezuela’s economy. Turkey also paid a price for taking on the US as
the lira plunged, forcing the central bank to rapidly increase interest rates. In
the Middle East, Saudi Arabia, emboldened by the prosperity of higher oil prices and
perceived support from the US, murdered a dissident journalist, Jamal Khashoggi,
bringing into focus just how unstable relationships with countries that do not
respect human rights can be.

Developed markets have also had their share of woes with Brexit looming on the
horizon without a clear deal between the UK and the European Union, and Italy,
Poland and Hungary flexing the strained cords of the terms of their membership of
the EU.

In South Africa, political change did not bring about an economic turnaround.
Battered by global events and slow progress in fighting corruption, by the third
quarter we entered a recession, with unemployment at record highs and discontent
growing. With the rand back at R14.20 to the US dollar, everyone feels poorer.
Political rhetoric around land appropriation without compensation, the resignation
of Minister of Finance, Nhlanhla Nene, and the pushback from public servants fearing
prosecutions have meant less investment, more pessimism and an increasing
realisation that there are no quick fixes.

Regulatory changes
On the regulatory front, much has changed for asset managers and financial services
companies. The Default Regulations which came into force in September 2017 becomes
mandatory as from 1 March 2019, as does ASISA’s Retirement Savings Cost “RSC”
Disclosure directive. This means that all asset managers and umbrella funds are
obliged to disclose both TERs and TICs to the boards of trustees of retirement
funds. This requirement has been a feature of the retail landscape for a number of
years, but the retirement fund industry has managed to hide in the shadows. Not any
longer. In addition, National Treasury increased the level of offshore investments
for retirement funds to 30%, and for unit trust and insurance companies to 40%. It
also made it clear that it wants to see further consolidation in the retirement fund
industry, with 1 650 standalone retirement funds reducing to 200.

Sygnia is very well positioned for all those changes. As the lowest cost provider of
financial savings and investment solutions we do not have to worry about a margin
squeeze. We have also always supported full fee transparency across our product
ranges and have provided this information to all our clients well in advance of
regulatory requirements. Our acquisition of db X-trackers (RF) Proprietary Limited
from Deutsche Bank in 2017 also positions us well for the demand for offshore
investments at a reasonable cost. Our administration platforms allow for seamless
integration of institutional and retail solutions, working well to deliver on the
requirements of Default Regulations. We have also upgraded our stockbroking
infrastructure to allow for low-cost execution of all transactions to ensure that
trading costs do not erode investment outcomes. In perhaps too public a manner,
after 13 years, we decided to close our hedge funds product range. We do not believe
that in an environment of volatility and low growth, where every cent counts, we
should facilitate product structures that allow asset managers to charge management
fees, which in some cases have ranged from 5% to 10% per annum. Even if the closure
was regarded as too public by many, it brought much-needed attention to the issue of
fees and lack of fee transparency in the industry.

Corporate activism
Sygnia continued to fight corporate corruption and inefficiency. Early in 2018 we
highlighted the JSE’s archaic listing requirements which enabled unscrupulous
corporate entities and individuals to benefit at the expense of pensioners by
listing unsound vehicles. This affects every saver in South Africa. We take great
pride in the fact that in September 2018 the JSE published a discussion document on
strengthening its listing requirement framework. We will continue to fight to
restore law and order in South Africa. It is still surprising that so many South
Africans do not realise how close to an economic and political abyss we came, and
what it took behind the scenes to save the day.

There are many unsung heroes and many stories still to be told. We are proud to be
part of the solution rather than part of the problem.

Financial performance
Despite 2018 being a challenging and economically turbulent environment for growth,
Sygnia continued to grow assets under management and administration to R222.6
billion as at 30 September 2018 (2017: R184.3 billion). The assets showed growth
despite the challenging market environment with the FTSE/JSE All Share Index
returning 3.32% over the year, the JSE All Bond Composite Index 7.14% and the MSCI
World Index, in SA Rands, 15.99%.

The acquisition of db X-trackers (RF) Proprietary Limited from Deutsche Bank in
2017, rebranded Sygnia Itrix,positioned Sygnia favourably for the demand for
offshore investments at a reasonable cost. Sygnia’s administration platforms allow
for seamless integration of institutional and retail solutions, while its
stockbroking infrastructure was also upgraded to allow for low-cost execution of all
transactions, ensuring its trading costs have no negative effect on investment

Sygnia’s investment performance remained strong despite the swings in market
sentiment and maintaining its position at the forefront of technological
advancements remains key to cutting costs. Sygnia’s revenue in the financial year to
30 September 2018 grew by 26.6% to R421.9 million compared to the prior financial
year (2017: R333.1 million). The growth in revenue was a result of a growth in
existing assets under management and administration during the year, new client
flows, a strong performance from Sygnia Securities in generating execution income,
as well as the enhanced revenue stream from Sygnia Itrix, which was included for a
full 12 months in comparison to the prior year where it was only included for three
months from the date of acquisition on 1 July 2017.

Total expenses, at R278.9 million, rose by 21.0% (2017: R230.4 million). Expenditure
was at an increased level as a result of increased costs associated with the
administration and management of the Sygnia Itrix ETFs by third party outsourced
providers, as well as a general increase in the cost base of the Group as the levels
of business activity grew during the year. Staff costs are a significant component
of the Group’s costs and these grew as certain business units recruited to prepare
for growth (such as employee benefits and retail) as well as the increased costs
associated with the addition of strong senior management and additions to the
executive structure.

Despite the increases in the cost base, positive operating leverage was achieved
with a stronger growth in revenue than the growth in costs, resulting in a very
pleasing growth in profit from operations of 39.2% to R143.0 million (2017: R102.7

Finance costs for the Group were substantially higher than the previous year due to
the costs incurred on the funding structure implemented for the acquisition of
Sygnia Itrix. These funding costs were only recognised for a period of three months
in 2017 but have been recognised for the full year in 2018. The bulk of the finance
costs relate to the preference share structure that was implemented on 31 January

The most significant negative impact on the financial performance of the Group
during 2018 was a result of difficult market conditions leading to muted returns on
invested Group capital.

A very disappointing first six months of the financial year were on the way to a
degree of recovery during the second half, but this was impacted due to an extremely
volatile and challenging month in September. The Group capital is well diversified
and conservatively allocated, however it was difficult to avoid the very difficult
market conditions towards the end of the financial year.

Overall, net profit after tax increased by 9.1% to R101.0 million (2017: R92.5
million), a decent performance by the Group in the context of difficult market

Basic earnings per share in 2018 decreased by 0.8% to 69.15 cents (2017: 69.72
cents), with diluted earnings per share decreasing by 0.6% to 68.42 cents (2017:
68.82 cents). There were no headline earnings adjustments and therefore headline
earnings and diluted headline earnings per share were the same as basic earnings and
diluted earnings per share, respectively.

Corporate strategy and business performance
Sygnia has a very clear business strategy. We offer:
-  Asset management services in the form of passive and multi-managed investments;
-  A full spectrum of investment products such as unitised life funds, unit trusts,
   ETFs and segregated portfolios;
-  A full range of savings products including RAs, tax-free savings accounts,
   endowments, living annuities and preservation funds;
-  Institutional investment administration services;
-  Retail LISP platform services;
-  Treasury services;
-  Employee benefits, including SURF; and
-  Execution-only stockbroking.

On the institutional side Sygnia attracted a significant number of appointments in
the investment administration area, a low-cost service which, albeit not hugely
profitable, does give us exposure to some of the largest retirement funds in South

Sygnia Employee Benefits offers the lowest cost umbrella fund provider in South
Africa, and continues to grow, attracting larger employers as it gains critical
mass, as well as providing a comprehensive solution to medium-sized employers,
increasing its assets to R4.2 billion (2017: R2.4 billion).

We expect this to continue as full and honest fee disclosure comes into effect.

On the asset management front, many of our innovative products, such as the Sygnia
4th Industrial Revolution Global Equity Fund, which returned 22.0% during the year
and the Sygnia ForLife Annuity, a unique post-retirement savings solution, continued
to attract attention and inflows, as did our passive products. Our assets under
management in passive strategies reached R39.3 billion as at 30 September 2018. We
have also launched a Sygnia FAANG Plus Equity Fund to take advantage of the global
technological boom.

On the retail side we have embarked on the process of upgrading our retail
administration platform to ensure that we remain at the leading edge of technology
while creating leverage for growth in the retail market.

The number of clients utilising our LISP platform has grown tremendously from 8 237
at the end of September 2017 to 14 058 at the end of September 2018, a testament to
the fact that the Sygnia brand has grown in recognition among the South African

Our investment performance remained strong despite the randomness created by swings
in market sentiment. Most importantly we believe that we are well-positioned for the
future. Passive, low-cost strategies will start coming into their own and technology
remains key to keeping costs under control whilst accessible offshore investments
are in high demand.


Sygnia continues to be committed to the policy of sustainable transformation in all
spheres of its operation. It is very pleasing to see that transformation and gender
equality strategies have seen both black and female staff percentages at 62% and
58%, respectively, in 2018. In addition, qualifying staff with more than one year of
service with the Group participate as beneficiaries of the broad-based BEE staff
scheme, the Ulundi Trust, which controls 5.8% of Sygnia Limited.

As the first asset manager in South Africa with a female CEO, Sygnia prides itself
on gender diversity in management roles. With a strong black staff representation
and an ever-growing female workforce, Sygnia remains strongly committed to racial
and gender equality and transformation. It looks forward to breaking boundaries and
pioneering the way within the financial services sector.


Sygnia is committed to rewarding its shareholders with regular distributions of free
cash flow generated. Accounting for projected cash requirements, a gross final
dividend (no. 2) for the financial year ended 30 September 2018 of 35.00 cents per
share has been declared out of income reserves, resulting in a net dividend of 28.00
cents per share for shareholders subject to Dividends Tax (“DT”). Together with the
interim gross dividend of 25.00 cents per share, this amounts to a total gross
dividend of 60.00 cents per share.

In compliance with the JSE Listings Requirements, the following dates are

Last day to trade:                       Tuesday, 18 December 2018
Shares trade ex-dividend:                Wednesday, 19 December 2018
Record date:                             Friday, 21 December 2018
Payment date:                            Monday, 24 December 2018

Share certificates may not be dematerialised or rematerialised between Wednesday,
19 December 2018, and Friday, 21 December 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.


These audited summarised consolidated financial statements were approved by the
board of directors on 29 November 2018.

                                      NOTES                  2018        RESTATED 2017*
                                                           R000’s                R000’s
Intangible assets                         5               436 113               420 059
Property and equipment                                     29 125                29 848
Deferred tax assets                                         7 125                 3 803
Investments linked to investment                       79 832 055            44 204 715
 contract liabilities
Investments                                               262 428               295 936
Loans receivable                                           12 738                11 043
Taxation receivable                                         8 486                 1 066
Trade and other receivables                                60 523                78 572
Amounts owing by clearing houses                            9 317                14 341
Amounts owing by clients                                   46 777                76 537
Cash and cash equivalents                                 157 510               312 506
TOTAL ASSETS                                           80 862 197            45 448 427

Stated capital                                            665 901               665 939
Retained income                                           170 819               157 473
Reserves                                                 (212 457)             (215 230)
TOTAL EQUITY                                              624 263               608 182

Deferred tax liabilities                                   74 847                79 628
Investment contract liabilities                        78 107 787            42 967 589
Third-party liabilities arising on
consolidation of unit trust funds                       1 567 784             1 104 402

Loans payable                                                   -               165 201

Preference share liability                6               150 000                     -
Taxation payable                                            5 319                 8 423
Trade and other payables                                  276 049               424 036

Amounts owing by clearing houses                            2 550                     -
Amounts owing to clients                                   53 540                90 915

Bank overdraft                                                 58                    51
TOTAL LIABILITIES                                      80 237 934            44 840 245

TOTAL EQUITY AND LIABILITIES                           80 862 197            45 448 427

*Restated for measurement period adjustment, refer to note 5.

                                                NOTES                 2018            2017
                                                                    R000’s          R000’s
Revenue                                                            421 913         333 143
Expenses                                                          (278 886)       (230 402)

PROFIT FROM OPERATIONS                                             143 027         102 741
Investment contract income                                        4 954 592      3 486 992
Transfer to investment contract liabilities                      (4 954 592)    (3 486 992)

Interest income                                                      26 432         21 470

Other investment (loss) / income                                     (6 979)        14 975
Investment income and fair value adjustment
to third-party assets                                                     -          9 575
Fair value adjustment to third-party
liabilities                                                               -         (9 575)
Finance costs                                                       (14 133)        (5 833)

PROFIT BEFORE TAX                                                   148 347        133 353

Income tax expense                                                  (47 378)       (40 804)

INCOME FOR THE YEAR                                                 100 969         92 549

EARNINGS PER SHARE (CENTS)                          7
Basic                                                                 69.15          69.72
Diluted                                                               68.42          68.82

                                                 STATED     COMMON    GROUP EQUITY      SHARE-BASED    RETAINED      TOTAL
                                                CAPITAL    CONTROL      ADJUSTMENT          PAYMENT    EARNINGS     EQUITY
                                                R 000's    RESERVE         R 000's          RESERVE     R 000's    R 000's
                                                           R 000's                          R 000's

BALANCE AT 1 OCTOBER 2016                       507 729   (252 577)           (307)          35 034     131 607    421 486

Total comprehensive income
Total profit and comprehensive income for the
 year                                                 -          -               -                -      92 549     92 549

TOTAL COMPREHENSIVE INCOME FOR THE YEAR               -          -               -                -      92 549     92 549

Dividends paid                                        -                          -                -     (66 683)   (66 683)
Share issue                                     160 000          -               -                -           -    160 000
Share option expense                                  -          -               -            2 620           -      2 620
Transaction costs on issue of ordinary shares    (1 790)         -               -                -           -     (1 790)

TOTAL TRANSACTIONS WITH OWNERS                  158 210          -              -             2 620    (66 683)    94 147

BALANCE AT 30 SEPTEMBER 2017                    665 939   (252 577)         (307)             37 654   157 473    608 182

Total profit and comprehensive income for the
 year                                                -           -              -                 -    100 969    100 969

TOTAL COMPREHENSIVE INCOME FOR THE YEAR              -           -              -                 -    100 969    100 969

Dividends paid                                       -           -              -                 -    (87 623)   (87 623)
Share issue                                          -           -              -                 -          -          -
Share option expense                                 -           -              -             2 773          -      2 773
Transaction costs on issue of ordinary shares      (38)          -              -                 -          -        (38)

TOTAL TRANSACTIONS WITH OWNERS                     (38)          -              -             2 773    (87 623)   (84 888)

BALANCE AT 30 SEPTEMBER 2018                   665 901    (252 577)          (307)           40 427    170 819    624 263

                                                                                         2018                       2017
                                                                                       R000's                     R000's

Cash generated by operations                                                           78 105                    219 921
Dividends received                                                                        989                        823
Interest received                                                                      27 719                     20 066
Finance costs                                                                         (17 572)                      (323)
Taxation paid                                                                         (63 189)                   (33 167)
NET CASH INFLOW FROM OPERATING ACTIVITIES                                              26 052                    207 320


Additions to property and equipment                                                    (7 343)                    (7 544)
Additions to intangible assets                                                        (20 939)                    (3 142)
Purchase of investments                                                              (496 875)                   (98 598)
Proceeds on sale of investments                                                       441 454                     98 909
Acquisition of subsidiary, net of cash acquired                                             -                   (320 628)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES                                            (83 703)                  (331 003)


Dividends paid                                                                        (87 623)                   (66 683)
Issue of ordinary shares                                                                    -                    160 000
Issue of preference shares                                                            160 000                          -
Preference share redemption                                                           (10 000)                         -
Transaction costs on issue of ordinary shares                                             (38)                    (1 790)
(Decrease) / increase in loans payable                                               (159 692)                   159 692
Post-acquisition settlement of pre-acquisition                                              -                    (32 940)
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES                                   (97 353)                   218 279

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS                                 (155 004)                    94 595
Cash and cash equivalents at beginning of the year                                    312 455                    217 859
CASH AND CASH EQUIVALENTS AT END OF THE YEAR                                          157 451                    312 455
Cash and cash equivalents at the end of the year
included the following cash held on behalf of
policyholders and clients.                                                             52 120                    131 309

Cash held in overnight settlement accounts on behalf of policyholders of Sygnia Life and clients of Sygnia Securities is
included on the face of the statement of financial position under “Cash and cash equivalents” with a corresponding
payable to clients included in amounts owing to clients. This results in the movement in these cash amounts being
disclosed in the statement of cash flows. Changes in these amounts are shown under the “Changes in working capital”,
under the “Cash flows from operating activities” section on the statement of cash flows. These cash amounts fluctuate on
a daily basis and can result in significant fluctuations if comparing “Changes in working capital” between reporting



The audited summarised consolidated financial statements are prepared in accordance
with the requirements of the JSE Limited Listings Requirements for preliminary
reports, and the requirements of the Companies Act, 71 of 2008, applicable to
summary financial statements. The Listings Requirements require preliminary reports
to be prepared in accordance with the framework concepts, and the measurement and
recognition requirements of International Financial Reporting Standards (“IFRS”) and
the SAICA Financial Reporting Guides as issued by the Accounting Practises Committee
and Financial Pronouncements as issued by the Financial Reporting Standards Council
and to also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting (“IAS 34”). The accounting policies and methods of computation
applied in the preparation of the audited summarised consolidated financial
statements are in accordance with International Financial Reporting Standards and
are consistent with those accounting policies applied in the preparation of the
previous year’s consolidated annual financial statements. The audited summarised
consolidated financial statements and the full set of consolidated annual financial
statements were prepared under the supervision of M Buckham, BBusSci (Finance), CA
(SA), CFA (financial director), and approved by the board of directors on 29
November 2018.


The auditors, Deloitte & Touche, have issued their unmodified audit opinion on the
consolidated financial statements for the year ended 30 September 2018. The audit
was conducted in accordance with International Standards on Auditing. These
summarised financial statements have been derived from the consolidated financial
statements, with which they are consistent in all material respects. These audited
summarised consolidated financial statements have been audited by the company’s
auditors, who have issued an unmodified opinion. Copies of the audit reports and the
full consolidated financial statements are available for inspection at the company’s
registered office. The audit report does not necessarily cover all the information
contained in this announcement. Shareholders are therefore advised that in order to
obtain a full understanding of the nature of the auditor’s work they should obtain a
copy of that report together with accompanying financial information from the
company’s website or from the registered office of the company.

Any reference to future financial performance included in this announcement has not
been reviewed or reported on by the company’s auditors.


The preparation of the audited summarised consolidated financial statements in
conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and the reporting amounts of
assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis of making judgements about carrying values of assets and liabilities that are
not readily apparent from other sources.

Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis by the
directors and management. Revisions to accounting estimates are recognised in the
period in which the estimate is revised, if the revision affects only that period or
in the period of the revision and future periods if the revision affects both
current and future periods.

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, except for judgements used in business combinations and estimates relating to
the valuation of the share-based payment expense where inputs based on observable
market data are used to estimate the fair value of the share-based payment.

Critical accounting estimates are those which involve the most complex or subjective
judgements or assessments. The areas of the Group’s business that typically require
such estimates and judgements are the determination of the fair value for financial
assets and liabilities, capitalisation of development costs as intangible assets,
judgements relating to goodwill arising on acquisition of a subsidiary and share-
based payments. For estimates and judgements on goodwill and intangible assets
related to the acquisition of Sygnia Itrix refer to note 5. Further information
about the assumptions made in measuring fair values are disclosed in the notes to
the audited consolidated annual financial statements, which are available for


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.


2018                       OPENING BALANCE AT 1        ADDITIONS   CLOSING BALANCE AT
                                   OCTOBER 2017                     30 SEPTEMBER 2018

                                         R000’s           R000’s               R000’s

Computer software                        15 695           18 804               34 499
Goodwill                                149 698                -              149 698
Management contracts                    253 885                -              253 885
Customer relationships                   14 176            2 135               16 311
Licence                                   1 170                -                1 170

                                        434 624           20 939              455 563

2018                       OPENING BALANCE AT 1        ADDITIONS   CLOSING BALANCE AT
                                   OCTOBER 2017                     30 SEPTEMBER 2018
ACCUMULATED AMORTISATION                 R000’s           R000’s               R000’s

Computer software                        12 568            3 198               15 766
Goodwill                                     31                -                   31
Management contracts                          -                -                     -
Customer relationships                    1 966            1 570               3 536
Licence                                       -              117                  117

                                         14 565            4 885               19 450
Computer software                                                              18 733
Goodwill                                                                      149 667
Management contracts                                                          253 885
Customer relationships                                                         12 775
Licence                                                                         1 053
                                                                              436 113
Goodwill consists of amounts relating to two separate cash generating units (“CGUs”),
namely SURF (previously, Gallet Employee Benefits) and Sygnia Itrix. Consequently
there are two separate goodwill impairment assessments relating to each of the CGUs.
The carrying amount relating to SURF is R18.5 million (2017: R18.5 million) and the
carrying amount relating to Sygnia Itrix is R130.8 million (2017: R130.8 million
following measurement period adjustment).

 2017                     OPENING                  ACQUISITIONS       MEASUREMENT        DEFERRED TAX      RESTATED
                       BALANCE AT     ADDITIONS         THROUGH            PERIOD         RELATING TO       CLOSING
                        1 OCTOBER                      BUSINESS        ADJUSTMENT         MEASUREMENT    BALANCE AT
                             2016                   COMBINATION                                PERIOD            30
                                                                                           ADJUSTMENT     SEPTEMBER
                           R000's        R000's          R000's            R000's              R000's        R000’s

 Computer software         12 553         3 142               -                 -                   -        15 695
 Goodwill                  18 896             -         302 806          (238 895)             66 891       149 698
 contracts                      -             -               -           253 885                   -       253 885
 relationships             12 133             -          17 033           (14 990)                  -        14 176
 Licence                        -             -           1 170                 -                   -         1 170

                           43 582         3 142         321 009                 -              66 891       434 624

                                                   OPENING BALANCE       AMORTISATION      RESTATED CLOSING BALANCE
 2017                                                 AT 1 OCTOBER                            AT 30 SEPTEMBER 2017*
 ACCUMULATED AMORTISATION AND IMPAIRMENT                    R000's             R000's                        R000’s

 Computer software                                          10 302             2 266                         12 568
 Goodwill                                                       31                 -                             31
 Customer relationships                                        640             1 326                          1 966
                                                            10 973             3 592                         14 565
 *Restated for measurement period adjustment

  CARRYING AMOUNT                                                   RESTATED CLOSING BALANCE AT 30 SEPTEMBER 2017*
  Computer software                                                                                          3 127
  Goodwill                                                                                                 149 667
  Management contracts                                                                                     253 885
  Customer relationships                                                                                    12 210
  Licence                                                                                                    1 170

                                                                                                           420 059
 *Restated for measurement period adjustment

Goodwill consists of amounts relating to two separate cash generating units (CGUs),
namely SURF (previously, Gallet Employee Benefits) and Sygnia Itrix. Consequently,
there are two separate goodwill impairment assessments relating to each of the CGUs.
The carrying amount relating to SURF is R18.5 million (2017: R18.5 million) and the
carrying amount relating to Sygnia Itrix is R130.8 million (2017: R130.8 million
(following measurement period adjustment).

Purchase price allocation valuation at acquisition of Sygnia Itrix
Included in intangible assets are amounts that were identified and measured at fair
value following the acquisition of Sygnia Itrix on 1 July 2017. At 30 September 2017
the assets were provisionally fair valued in terms of IAS 38 Intangible Assets (“IAS
38”) and IFRS 3 Business Combinations (“IFRS 3”). The provisional process identified
two intangible assets, being the client relationships associated with the investment
plan that was acquired as part of the transaction, and an amount associated with the
establishment costs of the Sygnia Itrix management company licence as well as the
costs associated with the establishment of each of the individually listed ETFs.

The client relationships were valued using a discounted cashflow methodology, where
the net cashflows derived from the investment plan were estimated over a 10 year
time horizon and then discounted to the date of acquisition. The net cashflows
included the revenue generated from the LISP administration fees as well as the ETF
investment fees generated by the AUM held by investment plan clients. An amount of
R17.0 million was provisionally ascribed to the client relationships.

The licence was also valued, however a “cost incurred” valuation basis was used in
that instance and a value of R1.2 million was ascribed to the fair value of the
licence. The excess of the purchase price and the net tangible and intangible assets
was then allocated to goodwill, which amounted to R302.8 million under the
provisional basis.

Following additional consideration as to the existence of any other intangible
assets that could be identified at the acquisition date and were required to be fair
valued, it was considered that an additional intangible asset existed in the form of
management contracts. The management contracts were identified as the contractual
relationships between the management company acquired, being Sygnia Itrix, and the
five ETFs that were in existence at the date of acquisition, being Sygnia Itrix
Eurostoxx50, Sygnia Itrix FTSE100, Sygnia Itrix MSCI Japan, Sygnia Itrix MSCI US and
Sygnia Itrix MSCI World.

It was determined that the contractual relationship between the ETFs and the
management company resulted in a right for the management company to receive a
revenue stream from the established ETFs and that contractual relationship
represented an intangible asset that fell under the ambit of IAS 38.

The methodology applied to the valuation was to determine the net cashflows
attributable to the five pre-existing ETFs over a time horizon of six years. The net
cashflows were determined with reference to the revenue generated by each of the
ETFs, based on the AUM in existence at acquisition date, less any costs associated
with the revenue generated, which included fixed and variable costs incurred in
relation to the asset management and administration of the ETFs, index tracking,
custody and trading costs. In determining the growth in the value of the ETF AUM
over time the factors included market returns (for which historical growth in the
ETF prices were used), dividend yields and the rand depreciation rate against the
relevant offshore referenced currencies (which included USD, GBP, EUR and JPY). No
new business flows were modelled against the growth in the AUM as they were not
considered to be a component of the management contract intangible.

The net cashflows over the six year time horizon, added to the terminal value at the
end of the sixth year, were discounted to determine the present value of the
management contract intangible asset.

The factors utilised in the discounted cashflow valuation were as follows:

GBP                                                                             7.20%
EUR                                                                             7.20%
USD                                                                             5.70%
JPY                                                                             8.51%
SYGUK                                                                           4.63%
SYGEU                                                                           2.94%
SYGUS                                                                          11.47%
SYGWD                                                                           7.44%
SYGJP                                                                           7.32%
Discount rate                                                                  20.75%
Tax rate                                                                       28.00%
Growth rate                                                                     6.00%

Determining useful life
The management contracts were determined to have an indefinite useful life. Based on
the relevant factors associated with the management contracts it was clearly
determined that the revenue stream to be derived from the contractual relationships
with the ETFs is expected for the foreseeable future, with no limit, and there is no
intention for those contracts to be terminated for any reason whatsoever. Given the
nature of the ETFs, being index tracking investment products that will form a
significant part of the Group’s ongoing strategy of reducing the overall cost of
investments to the investing public, it is clear that there is no finite date at
which the intangible should be amortised to zero.

On the other hand the investment plan is deemed to have a finite life span as it is
likely that clients investing through the investment plan will ultimately migrate to
the lower cost Sygnia LISP.

Reclassification of intangible assets
As a result of the reassessment of the provisional allocation of the excess of the
purchase price over the tangible assets at acquisition date, it was necessary to
reclassify the provisional assets identified to the final assessed identified

The investment plan was assessed to have a lower value as the provisional valuation
included a component of net cash flows related to the management contracts, which
has been separately included in the management contract valuation. The licence
valuation was unaffected. In addition to recognising the value of intangible assets
in the PPAV exercise a corresponding deferred tax liability has been recognised
against the identified intangibles. The difference between the purchase price and
the sum of the net tangible and intangible assets has been recognised as goodwill.
The effect of the measurement period adjustments is reflected in the table above.
Critical accounting estimates and judgements
Based on the impairment indicator tests described below, where impairment indicators
were identified, management assessed the recoverable amount of the CGUs based on
value-in-use calculations of the various CGUs. These calculations use cash flow
projections based on financial budgets, approved by management, for a five-year
planning period. Where appropriate, cash flows were extrapolated into perpetuity by
using a terminal growth rate model. A key input used in the models to determine the
value- in-use of the CGUs is the pre-tax discount rate applied to management’s
forecasted cash flows, which reflects the current market assessments of time value
of money and the risk specific to the CGU.

Impairment evaluation of goodwill
When goodwill is evaluated for impairment on an annual basis, the value in use is
assessed using a discounted cash flow-based valuation of the CGUs to which the
goodwill can be allocated on a reasonable basis. These assumptions, which are
benchmarked against similar entities in the industry, have been used in estimating
the value in use of the CGUs to which the goodwill has been allocated:

                                                           SURF           SYGNIA ITRIX

Risk-free rate (R186 Government Bond)                     9.00%                  9.00%
Tax rate                                                 28.00%                 28.00%
Growth rate                                               8.00%                  6.00%
Terminal growth rate                                      4.90%                  4.90%
Discount rate                                            20.75%                 20.75%

A reasonably possible change in these assumptions would not cause the carrying
amount to exceed its recoverable amount.

Impairment evaluation of indefinite life intangibles
The management contracts intangible is determined to have an infinite life and
management has conducted an assessment of whether the management contracts
intangible requires impairment at 30 September 2018.

These assumptions, which are benchmarked against similar entities in the industry,
have been used in estimating the value in use of the management contracts

Risk-free rate (R186 Government bond)                                            9.00%
Tax rate                                                                        28.00%
Growth rate                                                                      6.00%
Terminal growth rate                                                             4.90%
Discount rate                                                                   20.75%

Impairment evaluation of finite life intangibles
The carrying value of all intangibles with finite lives were assessed at 30
September 2018, and management does not deem any to be impaired.

Sensitivity analysis
Customer relationships are amortised over a period of nine years, which represents
management’s best estimate of the period over which economic benefits are expected
to be derived. The amortisation charge on the customer relationships for the year
ending 30 September 2018 was R1.5 million. This amortisation charge related
specifically to the customer relationship intangible recognised in respect of the
acquisition of Gallet in the prior year in addition to the customer relationships
recognised in the valuation of the investment plan.

An amortisation charge of R116 994 was recognised against the licence intangible.
There was no amortisation against the management contract intangible as it was
assessed to have an indefinite life. The amortisation charge of intangible assets is
sensitive to the useful life, which is illustrated in the table below:

ASSUMPTIONS                      SCENARIO 1   SCENARIO 2            SCENARIO 1            SCENARIO 1
                                                           AMORTISATION CHARGE   AMORTISATION CHARGE
                                                                   ON CUSTOMER           ON CUSTOMER
                                                           RELATIONSHIPS WOULD   RELATIONSHIPS WOULD
                                                            HAVE INCREASED TO:    HAVE INCREASED TO:

30-Sep-18                Years       Years        Years
Amortisation period          9           5           15              2 825 273               941 758

A sensitivity analysis in respect of the licence has not performed as it is
immaterial. A sensitivity analysis on management contracts has also not been
performed as it is an indefinite life intangible asset.

                                                                    2018                      2017
                                                                  R'000s                    R'000s

Nedbank Limited                                                  150 000                         -

                                                                 150 000                         -

On 31 January 2018 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 loan
payable that was in place for the initial funding of the purchase of Sygnia Itrix.

As at 30 September 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. The obligation has been classified as 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. This dividend
rate has decreased to 71% of prime subsequent to 30 September 2018. The dividends
are cumulative. The accrued dividends at 30 September 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. An amount of R10 million was redeemed, at
the option of the Group, on 31 July 2018, reducing the preference share liability
from R160 million to R150 million.

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.

                                                            2018               2017

                                                          R000’s             R000’s
Profit attributable to ordinary shareholders             100 969             92 549
HEADLINE EARNINGS                                        100 969             92 549

The weighted average number of shares and diluted weighted average number of shares
were calculated as follows:

                                                NUMBER OF SHARES   NUMBER OF SHARES
                                                            2018               2017

Number of ordinary shares at the beginning of        154 955 778        137 178 000
Number of shares issued during the year                        -         17 777 778
Number of ordinary shares at end of year             154 955 778        154 955 778

Weighted average number of ordinary shares
Weighted number of ordinary shares at the            146 022 612        128 244 834
beginning of the year
Effect of bonus shares issued in rights offer                  -          2 539 683
Weighted number of shares issued during the                    -          1 962 166
Weighted number of shares during the period          146 022 612        132 746 682

                                                            2018               2017
Basic and diluted earnings per share (cents)              R000’s             R000’s

Earnings attributable to ordinary shareholders           100 969             92 549
Headline earnings                                        100 969             92 549
Weighted average number of ordinary shares in        146 022 612        132 746 682
issue (basic)
Weighted average number of ordinary shares in        147 565 121        134 469 115
issue (diluted)
                                                           CENTS              CENTS

Earnings per share (basic)                                 69.15              69.72
Earnings per share (diluted)                               68.42              68.82
Headline earnings per share (basic)                        69.15              69.72
Headline earnings per share (diluted)                      68.42              68.82
Net asset value per share                                 427.52             458.15
Tangible net asset value per share                        128.85             192.11

Net asset value per share is calculated by dividing the Group's total assets less its
liabilities by the weighted average number of ordinary shares in issue. The tangible net
asset value is the net asset value excluding intangible assets divided by the weighted
average number of ordinary shares.


This announcement does not include the information required pursuant to paragraph
16A(j) of IAS 34. The full disclosure is contained in the consolidated annual financial
statements, available on the issuer’s website, at the issuer’s registered offices and
upon request.


The directors are not aware of any other matter or circumstances, other than listed
below, arising since the end of the financial period, not otherwise dealt with in the
summarised consolidated financial statements, that significantly affect the financial
position of the Group or the results of its operations.

During the current year an amount of USD234 000 (R3 001 050) was paid to a software
vendor with respect to the implementation of a trading platform in one of the Group
subsidiaries. Subsequent to the balance sheet date a decision was made to suspend the
implementation and therefore the capitalised implementation cost will be impaired. The
impairment will be recorded in the 2019 financial results.


During the current year Sygnia engaged with a UK-based company, FNZ (UK) Ltd (“FNZ”),
a provider of an investment transaction and custodial system, called FNZ Core Platform,
in order for the Group to upgrade its current retail platform offering. An Interim
Services Agreement (“ISA”) was concluded between Sygnia and FNZ, which sets out the
obligations for FNZ to develop and implement the platform offering over a period that
extends into the latter half of 2019. The payments to be made in terms of the ISA will
be contingent on the completion of various milestones as set out in the ISA and defined
as the Initial Implementation Milestones. Due to the uncertainty of the specific
deliverable dates of each of the milestones the timing of the payments is not certain
and therefore there is no present obligation at 30 September 2018. The progressive
payments during 2018/2019 do, however, represent a contingent liability as the payments
are likely as the milestones are achieved and the details thereof are disclosed below.

An initial payment of GBP650 000 (R11.8 million) was made on the date of signature and
a further GBP1.65 million is to be settled over a period of fulfilment of milestone
dates. The effect on the financial position of the company would be a recognition of
the implementation costs as an intangible asset, which will be amortised over the
useful life of the asset. At 30 September the amount of GBP650 000 has been recognised
in “Computer Software” intangibles, however, it has not yet been amortised as the asset
has not been brought into use.

30 November 2018

7th Floor, The Foundry
Cardiff Street
Green Point
South Africa
T: +27(0) 21 446 4940
F: +27(0) 21 446 4950

Unit 40, 6th Floor
Katherine and West building
West Street
T: +27 (0) 10 595 0550
F: +27 (0) 86 206 5173

Office 2, 2nd Floor
1 Nokwe Avenue
Umhlanga Ridge
T: +27 (0) 31 001 0650
F: +27 (0) 86 206 4421


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