reviewed condensed consolidated financial statements · since inception in november 2015 to march...

Reviewed Condensed Consolidated Financial Statements for the six months ended31 March 2019

sygnia LiMiTED REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2

Sygnia highlights

2015

2015

2015

2015

2016

2016

2016

2016

Rm

110

29

121

110

131

35

146

121

147

34

159

179

207

▲ 10.6%

37

▲ 19.5% ▲ 11.6%

181

▲ 26.3%

198

Interim dividend of

25c Per share

2017

2017

2017

2017

2018

2018

2018

2018

Rb

Rm

Profit from operations Number of staff

2019

229 228

2019

44

2019

221

2019

Revenue Assets under management and administration


General informationCountry of incorporation and domicile

south africa

Nature of business and principal activities

Sygnia Limited and its subsidiaries (the Group) is a specialist financial services group headquartered in South Africa and listed on the Johannesburg stock exchange (Jse) and a2X Markets. The Group focuses on the provision of investment management, savings products and administration solutions to institutional and retail clients predominantly located in south africa. The main services provided by the Group include multi-manager investment products, index-tracking investment products, customised/bespoke investment strategy management, stockbroking, transition management, investment administration/platform services and employee benefit administration services.

Directors

Name Date of appointment Date of resignation

MF Wierzycka (CeO) 17/09/2007

Dr hufton (Deputy CeO) 01/09/2018

hI Bhorat (Chairman) # 11/06/2015

M Buckham (CFO) 01/02/2017 31/12/2018

KT hopkins *# 11/06/2015 25/02/2019

sa Zinn *# 11/06/2015 31/12/2018

IK Moyane *# 10/09/2015

Mh Jonas *# 01/09/2018

a Crawford-Brunt *# 01/11/2018

M sirkot (CFO) 16/01/2019

r sithubi *# 26/02/2019

* Independent # Non-executive

Registered office:7th Floor, The Foundry Cardiff Street Green Point 8001

Postal address:PO Box 51591 Waterfront 8002

Auditor:Deloitte & Touche1st Floor, The SquareCape Quarter 27 somerset road Green Point 8005

Company secretary:G MacLachlan appointed: 01/11/2016

Company registration number

2007/025416/06

5 Commentary of the directors

10 Independent auditor’s review report

11 Condensed consolidated statement of financial position

12 Condensed consolidated statement of profit or loss and other comprehensive income

13 Condensed consolidated statement of changes in equity

14 Condensed consolidated statement of cash flows

15 Notes to the condensed consolidated financial statements


Contents


Commentary of the directorsThe directors have pleasure in presenting their report on the activities of the Group for the period ended 31 March 2019.

Main business and operations

Highlights · assets under management and administration of r228.1 billion as at 31 March 2019 (2018: r180.6 billion), up

26.3% · revenue of r229.3 million (2018: r207.3 million), up 10.6% · Operating profit (before tax and finance charges) of R72.6 million (2018: R64.0 million), up 13.3% · Profit after tax of R44.2 million (2018: R37.0 million), up 19.5% · Basic earnings per share of 30.27 cents (2018: 25.34 cents), up 19.5% · headline earnings per share of 31.74 cents (2018: 25.34 cents), up 25.3% · Total dividend per share of 25.00 cents (2018: 25.00 cents)

Market overview

The market turbulence over the six months to 31 March 2019 is unprecedented. The last quarter of 2018 saw a massive sell-off across all asset classes, triggered by the unwinding of quantitative easing in the US, political uncertainty in the United Kingdom, a trade war between China and the US and slowing global growth. This reversed sharply in the first quarter of 2019, when the US paused its interest rate increase programme as evidence of a global slowdown became undeniable. south africa was once again a victim of international macro-trends rather than a driver of its own destiny. The FTse/Jse all share Index fell 4.9% in the last three months of 2018, only to recover 8.0% in the first quarter of 2019, delivering 2.7% over the six months to 31 March 2019. The JSE All Bond Index rose 6.7%, while the rand depreciated by 1.6%. On a more positive note, the country escaped a credit rating downgrade by Moody’s – despite deteriorating fundamentals and revelations of the extent of corruption over the past decade, exposed by both the Zondo and PIC Commissions of Inquiry.

as a result of this volatility, the past six months have been challenging for all cyclical businesses – and particularly for the asset management industry. a few strong trends have, however, started to gain traction and are likely to shape the industry going forward.

On the institutional side, the shrinking of the stand-alone retirement funds market caused by a migration to umbrella funds continues, as the regulation and governance expectations placed on boards of trustees become increasingly onerous. The FsCa seems determined to encourage the consolidation, as per the 2017/18 Budget directive, that the current 1 560 funds should reduce to less than 200. a new disclosure standard introduced by asIsa, which became effective on 1 March 2019, enforces rigorous fee and cost disclosures for the first time in an industry blighted by a lack of transparency. The disclosure standard affects asset managers and umbrella fund arrangements and has led many boards of trustees and employers to review their retirement fund arrangements. Furthermore, default regulations that compel all retirement funds to offer members cost-effective default investment, preservation and retirement solutions came into full effect on 1 March 2019 and are likely to affect the retail market going forward.

On the retail side, most investors have become much more fearful of market volatility and are seeking more stable investment propositions and enhanced offshore exposure.

Despite the difficult market conditions, Sygnia’s operational performance has remained stable, with net operating profit for the period (before tax and finance charges) up 13.3%. Assets under management and administration (AUM) increased to r228.1 billion as at 31 March 2019 (2018: r180.6 billion) due to organic growth and net inflows.


Investment performance review

sygnia’s investment portfolios were all very well-positioned for developments in the investment markets. The investment team’s negative view that the political situation would impact economic growth and investment risk was fully vindicated, with investment performance recovering strongly despite the volatility. sygnia’s investment philosophy, with its focus on risk management and diversification, remains unchanged. We believe that our active tactical asset allocation strategies, core focus on low-cost passive investments and support for technology-driven disruptive investment themes provide adequate levers to deliver value to all investors going forward.

Sygnia offers two main portfolio ranges to retirement funds: the Sygnia Signature multi-manager funds and the Sygnia skeleton passive funds.

The performance of both ranges has been exceptional. All Sygnia Signature risk-profiled portfolios are ranked number one in their respective survey categories over 1, 5 and 7 years, while the sygnia skeleton funds all feature in the top quartile (Source: Alexander Forbes Multi-Manager Watch Survey, March 2019).

Over the 12 months to 31 March 2019, institutional assets under management and administration increased by 24.7% to R200.1 billion (2018: R160.4 billion). Sygnia also won significant new assets-under-administration appointments over the period.

In the retail market, Sygnia offers a wide range of domestic and global specialist index-tracking funds, as well as a range of risk-profiled global balanced funds, the Sygnia Skeleton Balanced unit trusts.

The highlights of our retail performance were:

· The Sygnia Skeleton Balanced 70 Fund, a passively managed high-equity global balanced unit trust, ranked 9th out of 89 unit trusts* (most of them actively managed) in the South African – Multi-Asset – High Equity category since its inception in October 2013 to March 2019.

· The Sygnia Skeleton Balanced 60 Fund, a passively managed medium-equity global balanced unit trust, ranked 1st out of 53 unit trusts* (most of them actively managed) in the South African – Multi-Asset – Medium Equity category since its inception in May 2014 to March 2019.

· The Sygnia Skeleton Balanced 40 Fund, a passively managed low-equity global balanced unit trust, ranked 4th out of 83 unit trusts* (most of them actively managed) in the South African – Multi-Asset – Low Equity category since its inception in March 2014 to March 2019.

· The Sygnia SWIX Index Fund, a passively managed domestic equity unit trust, ranked 26th out of 101 unit trusts* (most of them actively managed) in the South African – Equity – General category since its inception in October 2013 to March 2019.

· The Sygnia Skeleton International Equity Fund of Funds, a passively managed international equity unit trust, ranked 4th out of 43 unit trusts* (most of them actively managed) in the Global – Equity – General category over the period since inception in November 2015 to March 2019.

· The Sygnia 4th Industrial Revolution Global Equity Fund, a passively managed international equity unit trust with a technology focus, ranked 2nd out of 47 unit trusts* (most of them actively managed) in the Global – Equity – General category since its inception in October 2016 to March 2019.

· Sygnia Itrix MSCI USA ETF is the top performing index tracking fund in South Africa over 10 years and top in the Regional – General – Equity category.

*source: MoneyMate

In the year to 31 March 2019, third-party retail assets under management increased by 16.2% to r28.0 billion (2018: r24.1 billion).

Commentary of the directors/


Business review

as a low-cost investment and savings product provider, sygnia is well-positioned to withstand current investment market headwinds, while experiencing none of the fee reduction pressures facing the financial services industry in general. Its focus on passive investing, fee transparency and technology-driven solutions has led to an overall growth in assets and investors, and the positive publicity associated with a strong, activist stance against corruption continues to advance awareness of the sygnia brand.

A number of initiatives embarked upon by Sygnia in the past five years have started to make meaningful contributions to the business strategy.

On the institutional side, our entry into the umbrella fund market in 2016 was well-timed. The Sygnia Umbrella Retirement Fund (SURF), with its all-in-one fee proposition, continues to gain traction, having grown its assets to r5.0 billion as at 31 March 2019 (2018: r3.2 billion), with an additional r0.8 billion in the process of transfer, bringing the total to R5.8 billion. This makes SURF the seventh largest commercial umbrella fund in South Africa. SURF is expected to continue to grow organically, as well as through opportunistic acquisitions.

sygnia’s exit from the costly funds of hedge funds strategies, albeit translating into a loss of management and performance fee revenue, has been well received by clients and will serve it well when the new fee disclosure standard gains traction. The advent of the default regulations has led to a natural convergence of institutional and retail markets, benefiting sygnia’s retail LIsP platform and its low-cost savings products.

Sygnia’s acquisition in 2017 of the db X-trackers business from Deutsche Bank, renamed Sygnia Itrix (RF) Proprietary Limited, has made sygnia the largest provider of exchange traded funds (eTFs) on the Johannesburg stock exchange, at a time when eTFs are growing in popularity as a product class among both institutional and wealth management businesses. It has also given sygnia the critical scale to be ranked as one of the two largest passive asset managers in south africa. assets under management in the sygnia Itrix eTFs grew to r19.0 billion as at 31 March 2019 (2018: r15.8 billion), while passively managed assets increased to r38.6 billion (2018: r32.6 billion).

Sygnia’s low-cost retail savings and investment products continue to attract investors, with retail AUM growing to r28.0 billion (2018: r24.1 billion). assets under management and administration on the sygnia LIsP platform increased to r9.9 billion (2018: r7.3 billion), while the number of individual accounts grew to 16 166 (2018: 12 403). Sygnia’s cost-effective digital marketing campaign and its public stance against corruption, at a time when other corporates remained silent, have resulted in increased brand awareness.

as a result of its core focus on fee transparency since inception, sygnia welcomes the asIsa disclosure standard, even as its peers struggle to adapt to the new regime.

sygnia’s investment administration platform, sygnia Platinum, continues to gain in popularity in the institutional market, as a drive to create efficiencies in the administration of retirement funds continues. Continued investment has increased the functionality of the platform, enabling sygnia to insource all outstanding administration and management of Sygnia Itrix ETFs in the first quarter of 2019.

Its stockbroking operation, sygnia securities Proprietary Limited, has seen a reduction in transaction volumes and margin compression, in line with its peers. This has, however, been compensated for through new revenue lines, including scrip lending and foreign exchange transacting.



And finally, innovation has remained a central theme of the business. Sygnia recognises that some initiatives will work while others will need to be amended or even abandoned. It is very cognisant of the impact of this on the business, but remains undeterred in its belief that the financial services industry needs disruption.

In terms of product innovation, Sygnia’s 4th Industrial Revolution Global Equity Fund and the Sygnia FAANG Plus Equity Fund have both grown significantly on the back of exceptional performance and continue to attract investors.

sygnia has, however, halted the launch of its planned cryptocurrency exchange, as the transacting volumes and prices of digital assets have plunged, making the financial projections of the business highly unattractive.

Key initiatives in 2019

Sygnia is expanding its offshore operations by establishing an office in the UK. It is continuing with its retail infrastructure upgrade project, which, although capital intensive, will, over the next three years, result in a significant reduction in costs, enhance scalability and provide opportunities to expand its operations offshore. Although it is too early to determine its commercial success, sygnia is rolling out a new, highly disruptive retail distribution initiative with a positive market reception.

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 amended code, Sygnia has suffered a decline in its rating. It has embarked on several meaningful initiatives to improve the rating, including changing the composition of the board of directors and executive management team, shifting procurement, increasing staff training expenditure and participating in the YES initiative. Sygnia is confident of regaining an acceptable level of compliance at the next review date.

Financial results

revenue in the six months to 31 March 2019 grew by 10.6% to r229.3 million (2018: r207.3 million). The loss of management and performance fees due to the closure of sygnia’s funds of hedge funds products and a decrease in stockbroking revenue as a result of subdued market conditions has been partially offset by new Group initiatives. Total expenses, at R165.4 million, rose by 20.7% (2018: R137.0 million), primarily driven by higher staff costs associated with increased business activity, once-off expenses associated with entering the UK market, an impairment to the Bitcoin exchange project and further investment in systems.

As stated previously, the Group is 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 to clients.

Costs incurred during the period amounted to r5.6 million (2018: r8.0 million), which were a direct result of funding the acquisition of Sygnia Itrix. The decrease from the prior period is due to restructuring of the finance from a bridge loan to preference shares.

The Group incurred a loss on invested capital of r4.4million (2018: r19.1million) during the period under review. Following a significant loss to the Group in the prior period, equity and currency investments have been substituted with fixed income investments. The loss in the current period is mainly due to closing out the equity and currency investments.



Overall, operating profit before tax and finance charges increased by 13.3% to R72.6 million (2018: R64.0 million). Operational performance has been primarily impacted by once-off items, including investments in the UK market, impairment to the Bitcoin exchange development and sygnia securities’ systems expenditure. The decrease in operational performance is offset by the decrease in loss on invested capital, resulting in an increase in net profit after tax of 19.5% to r44.2 million (2018: r37.0 million).

Basic earnings per share for the interim period ended 31 March 2019 increased by 19.5% to 30.27 cents (2018: 25.34 cents). The adjustment to headline earnings per share relates to the impairment of the Bitcoin exchange development, resulting in a headline earnings per share of 31.74 cents (2018: 25.34 cents). The difference between diluted earnings per share and diluted headline earnings per share is due to an increase in the weighted average number of shares for employee share options and the Ulundi staff share scheme.

a reassessment of the provisional allocation of the excess of the sygnia Itrix purchase price over the tangible assets at acquisition date was made at the financial year end in 2018, which resulted in a restatement of the intangible assets and deferred tax. This restatement was disclosed in the 2018 annual financial statements. The intangible assets and deferred tax have accordingly been restated for the period ended 31 March 2018. This reassessment had no impact on the income statement in the current reporting period.

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 for the period ended 31 March 2019 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, 18 June 2019

shares trade ex dividend: Wednesday, 19 June 2019

record date: Friday, 21 June 2019

Payment date: Monday, 24 June 2019

Share certificates may not be dematerialised or rematerialised between Wednesday, 19 June 2019, and Friday, 21 June 2019, 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 155 029 857; · sygnia’s tax reference number is 9334/221/16/6.

These condensed consolidated financial statements have been prepared under the supervision of the Financial Director, M. sirkot.


Independent auditor’s review report on condensed consolidated financial statements to the shareholders of Sygnia Limited

We have reviewed the condensed consolidated financial statements of Sygnia Limited, contained in the condensed consolidated financial statements, which comprise the condensed consolidated statement of financial position as at 31 March 2019 and the condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six months 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 condensed consolidated 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 condensed consolidated 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 condensed consolidated 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 condensed consolidated 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 the condensed consolidated 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 months period ended 31 March 2019 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.

National Executive: *LL Bam Chief Executive Officer *TMM Jordan Deputy Chief Executive Officer; Clients & Industries *MJ Jarvis Chief Operating Officer *AF Mackie Audit & assurance *N sing risk advisory DP Ndlovu Tax & Legal TP Pillay Consulting *JK Mazzocco Talent & Transformation MG Dicks risk Independence & Legal *KL hodson Corporate Finance *TJ Brown Chairman of the Boardregional leader: MN alberts

A full list of partners and directors is available on request *Partner and Registered AuditorB-BBee rating: Level 1 contribution in terms of the DTI Generic scorecard as per the amended Codes of Good Practiceassociate of Deloitte africa, a Member of Deloitte Touche Tohmatsu Limited

Deloitte & Touche registered auditor

Per: Brian Botes, Partner

31 May 2019

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 positionas at 31 March 2019

reviewed 31 March 2019

r’000s

restated reviewed

31 March 2018*r’000s

audited 30 september

2018r’000s

AssetsIntangible assets 437 281 419 983 436 113

Deferred tax assets 7 234 9 780 7 125

Property and equipment 30 515 27 947 29 125

Investments linked to investment contract liabilities 86 899 278 47 606 660 79 832 055

Investments 262 505 146 018 262 428

Loans receivable 12 072 10 837 12 738

Taxation receivable 18 155 4 433 8 486

Trade and other receivables 84 071 74 599 60 523

amounts owing by clearing houses 634 741 - 9 317

amounts owing by clients 14 729 416 436 46 777

Cash and cash equivalents 83 938 254 749 157 510

Total assets 88 484 519 48 971 442 80 862 197

Equitystated capital 666 467 665 901 665 901

retained income 163 855 143 337 170 819

reserves (212 156) (213 664) (212 457)

Total equity 618 166 595 574 624 263

LiabilitiesDeferred tax liabilities 76 346 80 447 74 847

Investment contract liabilities 84 702 407 46 007 717 78 107 787

Third-party liabilities arising on consolidation of unit trust funds 1 805 430 1 401 408 1 567 784

Preference share liability 150 000 160 000 150 000

Taxation payable 5 219 - 5 319

Trade and other payables 499 290 309 868 276 049

amounts owing to clearing houses - 103 418 2 550

amounts owing to clients 626 219 313 010 53 540

Bank overdraft 1 442 - 58

Total liabilities 87 866 353 48 375 868 80 237 934

Total equity and liabilities 88 484 519 48 971 442 80 862 197

*Restated for measurement period adjustment, refer to note 4.


Condensed consolidated statement of profit or loss and other comprehensive incomefor the period ended 31 March 2019

Note

reviewed six months

31 March 2019r’000s

reviewed six months

31 March 2018r’000s

audited for the year ended

30 september 2018

r’000s

revenue 6 229 268 207 308 421 913

expenses (165 358) (137 032) (278 886)

Profit from operations 63 910 70 276 143 027

Investment contract income 2 029 673 526 189 4 954 592

Transfer to investment contract liabilities (2 029 673) (526 189) (4 954 592)

Interest income 13 079 12 820 26 432

Other investment loss (4 413) (19 067) (6 979)

Finance costs (5 588) (8 002) (14 133)

Profit before tax 66 988 56 027 148 347

Income tax expense (22 787) (19 029) (47 378)

Total profit and comprehensive income for the period 44 201 36 998 100 969

Earnings per share (cents) 7

Basic 30.27 25.34 69.15

Diluted 30.02 24.72 68.42

13SygNiA LiMiTED reVIeWeD CONDeNseD CONsOLIDaTeD FINaNCIaL sTaTeMeNTs

Condensed consolidated statement of changes in equityfor the period ended 31 March 2019

stated capitalr’000s

Common control reserve r’000s

Group equity adjustment

r’000s

share-based payment reserve

r’000s

retained earnings r’000s

Total equity

r’000s

Balance at 1 October 2017 - Audited 665 939 (252 577) (307) 37 655 157 474 608 184

Total comprehensive income

Total profit and 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)

share option expense - - - 1 565 - 1 565

Transaction costs on issue of ordinary shares (38) - - - - (38)

Total transactions with owners (38) - - 1 565 (51 135) (49 608)

Balance at 31 March 2018 - Reviewed 665 901 (252 577) (307) 39 220 143 337 595 574





Dividends paid - - - - (36 489) (36 489)

share option expense - - - 1 207 - 1 207

Total transactions with owners - - - 1 207 (36 489) (35 282)

Balance at 30 September 2018 - Audited 665 901 (252 577) (307) 40 427 170 819 624 263





share issue 566 - - (194) - 372

Dividends paid - - - - (51 165) (51 165)

share option expense - - - 495 - 495

Total transactions with owners 566 - - 301 (51 165) (50 298)

Balance at 31 March 2019 - Reviewed 666 467 (252 577) (307) 40 728 163 855 618 166


Condensed consolidated statement of cash flowsfor the period ended 31 March 2019

reviewed six months

ended 31 March 2019

r’000s

reviewed six months

ended 31 March 2018

r’000s


30 september 2018

r’000s

Cash flows from operating activities

Profit before tax 66 988 56 027 148 347

Non-cash movements and adjustments to profit before tax 8 056 20 500 9 428

Changes in working capital 177 111 (110 035) (135 031)

Cash (utilised)/generated by policyholder activities (233 088) 16 771 55 361

Dividends received 61 627 989

Interest received 13 079 12 820 27 719

Interest paid (5 588) (8 002) (17 572)

Taxation paid (31 637) (35 974) (63 189)

Net cash (outflow)/inflow from operating activities (5 017) (47 266) 26 052

Cash flows from investing activities

Additions to property and equipment (6 071) (2 354) (7 343)

additions to intangible assets (7 167) (2 068) (20 939)

Purchases of investments (106 335) (283 397) (496 875)

Proceeds on the sale of investments 100 428 333 753 441 454

Net cash (outflow)/inflow from investing activities (19 145) 45 934 (83 703)

Cash flows from financing activities

Dividends paid (51 165) (51 135) (87 623)

Issue of ordinary shares 372 - -

Issue of preference shares - 160 000 160 000

Preference share redemption - - (10 000)

Transaction costs on issue of ordinary shares - (38) (38)

Decrease in loans payable - (165 201) (159 692)

Net cash outflow from financing activities (50 793) (56 374) (97 353)

Net decrease in cash and cash equivalents (74 955) (57 706) (155 004)

Cash and cash equivalents at beginning of the period 157 451 312 455 312 455

Cash and cash equivalents at end of the period 82 496 254 749 157 451

Cash and cash equivalents at the end of the period included the following cash held on behalf of policyholders and clients 26 128 54 403 52 120


Notes to the condensed consolidated financial statementsfor the period ended 31 March 2019

1. reporting entitySygnia 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 2019 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. statement of complianceThe interim financial statements are prepared in accordance with and contain the information required by 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 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 2018.

3. accounting policiesThe accounting policies and methods of computation applied in the preparation of these interim financial statements conform to International Financial reporting standards (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 2018, except for the mandatory adoption of IFrs 9 – Financial instruments (IFrs 9) and IFrs 15 – revenue from contracts with customers (IFrs 15).

The Group has applied both standards retrospectively without restating comparative figures.

Financial assets

In assessing how financial assets should be classified and measured, IFRS 9 requires the assessment of:

· The business model applied to manage the financial assets; · The nature of contractual cash flows relating to the specific instrument, whether they solely represent payments of

principal and interest.


The impact on the classification and measurement of financial assets was as follows for the Group: · Financial instruments, which are held to back client assets or for capital risk management purposes, previously

measured at fair value through profit or loss under IAS 39 - Financial Instruments: Recognition and Measurement (IAS 39), are also measured at fair value through profit or loss under IFRS 9;

· Loans and receivables that were classified as loans and receivables and measured at amortised cost under IAS 39 are measured at amortised cost under IFrs 9.

The principal accounting policies and method of computations set out have been applied consistently to all periods presented in these financial statements.

IFrs 9 replaces the ‘incurred loss’ model in Ias 39 with a forward-looking ‘expected credit loss’ (eCL) model to calculate impairments of financial assets. The new impairment model had no impact on the Group, as the majority of financial assets in the Group are measured at fair value through profit or loss.

Loans and receivables classified as financial assets at amortised cost are subject to the new ECL model. The Group holds only trade receivables with no financing component that have maturities of less than one year at amortised cost and, as such, has chosen to apply an approach similar to the simplified approach for expected credit losses under IFrs 9 to all its trade receivables. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime eCLs at each reporting date. It was noted that there was no impact from the incurred loss model to the eCL model.

Financial liabilities

The requirement for the classification and measurement under IFRS 9 has not changed significantly from IAS 39. The Group under IAS 39 classified investment contract liabilities and third-party liabilities arising on consolidation of unit trust funds at fair value through profit or loss, so as to eliminate an accounting mismatch as the investments linked to investment contract liabilities and the assets relating to the consolidated unit trust funds are carried at fair value through profit or loss. The Group has as part of its IFRS 9 implementation process considered the classification of its investments linked to investment contract liabilities and consolidated unit trust fund assets, and the direct impact these financial assets would have on the measurement on the related financial liabilities. It was found that the measurement of financial assets at fair value through profit or loss was appropriate and therefore to avoid an accounting mismatch, the corresponding financial liabilities were retained at fair value through profit or loss. Therefore, no impact upon adoption of IFRS 9 was identified.

Impact on adoption of IFRS 9

The net financial impact of the changes in classification and measurement after tax had a Rnil impact on opening retained earnings on 1 October 2018. Upon adoption of IFRS 9, the Group had no financial instruments measured at fair value through other comprehensive income.

Adoption of IFRS 15

The objective of IFRS 15 is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.

The core principle of IFrs 15 is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:

· Identify the contract(s) with a customer; · Identify the performance obligations in the contract;

Notes to the condensed consolidated financial statements//


· Determine the transaction price; · allocate the transaction price to the performance obligations in the contract; · Recognise revenue when (or as) the entity satisfies a performance obligation.

New disclosures about revenue are also introduced.

Impact on adoption of IFRS 15

The application of IFrs 15 did not result in any change to revenue recognised by sygnia for management fees and other fee income. Consequently, there was no financial impact to the Group on 1 October 2018 upon adoption of IFrs 15.

The following new IFRSs are applicable to the Group, have effective dates applicable to future financial years and have not been early adopted:

IFRS 2: Share-based payments

Effective for annual periods beginning on or after 31 December 2018.

The amendments are intended to eliminate diversity in practice, but are narrow in scope and address specific areas of classification and measurement.

Management has performed a high-level assessment to determine the potential impact to the performance and financial position of the Group when adopting the changes to IFRS 2. Based on this assessment, nothing has come to the attention of management that indicates that these changes will be significant.

IFRS 16: Leases

Effective for annual periods beginning on or after 1 January 2019.

The scope of IFRS 16 includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. IFRS 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under IAS 17.

The Group is currently in the process of performing a more detailed assessment of the impact of this new standard on the amounts reported in these financial statements and will provide more information in the financial statements for the year ending 30 September 2019. This standard will only become effective in the 2020 financial statements.

4. Use of estimates and judgements In preparing these 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 2018.

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 assets. The effect of the measurement period adjustments were disclosed in the consolidated financial statements for the year ended 30 September 2018. The reclassification impacts the comparative amounts as at 31 March 2018 previously presented on the statement of financial position as follows: “Intangible assets” increased by R66,891 and “Deferred tax liabilities” increased by R66,891. The net effect on the statement of financial position and the statement of profit or loss and other comprehensive income is nil.



5. segment informationThe 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. revenueThe Group’s operations and main revenue streams are those described in the last annual financial statements. The Group’s revenue is derived from contracts with customers.

reviewed six months ended

31 March 2019r’000s

reviewed six months ended 31

March 2018r’000s


30 september 2018

r’000s

Management fees 155 083 159 993 317 301

administration fees 29 647 29 900 63 162

Brokerage income 43 251 16 782 40 171

sundry income 1 287 633 1 279

229 268 207 308 421 913

7. earnings and headline earnings per share

reviewed six months ended

31 March 2019r’000s

restated reviewed six

months ended 31 March 2018*

r’000s


30 september 2018

r’000s

Profit attributable to ordinary shareholders 44 201 36 998 100 969

Impairment of intangible asset (net of tax) 2 161 - -

Headline earnings 46 362 36 998 100 969



7. earnings and headline earnings per share (cont.)

Number of ordinary shares issued 155 029 587 154 955 778 154 955 778

Weighted average number of shares (basic) 146 046 637 146 022 612 146 022 612

Weighted average number of shares (diluted) 147 258 296 149 681 172 147 565 121

Cents Cents Cents

earnings per share (basic) 30.27 25.34 69.15

earnings per share (diluted) 30.02 24.72 68.42

headline earnings per share (basic) 31.74 25.34 69.15

headline earnings per share (diluted) 31.48 24.72 68.42

Net asset value per share 423.27 407.86 427.52

Tangible net asset value per share 123.85 120.25 128.85


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 that 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).

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.


8. Corporate vs third party financial information (cont.)Condensed consolidated statement of financial position (cont.)

Reviewed as at 31 March 2019 Restated reviewed as at 31 March 2018* Audited as at 30 September 2018

Total r’000s

Corporatebalances

r’000s

Third-party balances

r’000sTotal

r’000s

Corporatebalances

r’000s


r’000sTotal

r’000s

Corporatebalances

r’000s


r’000sAssets

Intangible assets 437 281 437 281 - 419 983 419 983 - 436 113 436 113 -

Deferred tax assets 7 234 7 234 - 9 780 9 780 - 7 125 7 125 -

Property and equipment 30 515 30 515 - 27 947 27 947 - 29 125 29 125 -

Investments linked to investment contract liabilities 86 899 278 - 86 899 278 47 606 660 - 47 606 660 79 832 055 - 79 832 055

Investments 262 505 262 505 - 146 018 146 018 - 262 428 262 428 -

Loans receivable 12 072 12 072 - 10 837 10 837 - 12 738 12 738 -

Taxation receivable 18 155 18 155 - 4 433 4 433 - 8 486 8 486 -

Trade and other receivables 84 071 84 071 - 74 599 73 601 998 60 523 60 523 -

Collateral receivable - 212 080 (212 080) - - - - - -

amounts owing by clearing houses 634 741 23 251 611 490 - - - 9 317 - 9 317

amounts owing by clients 14 729 - 14 729 416 436 - 416 436 46 777 - 46 777

Cash and cash equivalents 83 938 57 809 26 129 254 749 200 346 54 403 157 510 105 382 52 128

Total assets 88 484 519 1 144 973 87 339 546 48 971 442 892 945 48 078 497 80 862 197 921 920 79 940 277

Equity

Total equity 618 166 618 166 - 595 574 595 574 - 624 263 624 263 -

Total equity 618 166 618 166 - 595 574 595 574 - 624 263 624 263 -

Liabilities

Deferred tax liabilities 76 346 74 474 1 872 80 447 74 649 5 798 74 847 72 543 2 304

Investment contract liabilities 84 702 407 - 84 702 407 46 007 717 - 46 007 717 78 107 787 - 78 107 787

Third-party liabilities arising on consolidation of unit trust funds 1 805 430 20 312 1 785 118 1 401 408 - 1 401 408 1 567 784 - 1 567 784

Preference share liability 150 000 150 000 - 160 000 160 000 - 150 000 150 000 -

Taxation payable 5 219 5 219 - - - - 5 319 5 319 -

Trade and other payables 499 290 66 853 432 437 309 868 62 722 247 146 276 049 69 737 206 312

securities borrowing - 208 507 (208 507) - - - - - -

amounts owing to clients 626 219 - 626 219 313 010 - 313 010 53 540 - 53 540

amounts owing to clearing houses - - - 103 418 - 103 418 2 550 - 2 550

Bank overdraft 1 442 1 442 - - - - 58 58 -

Total liabilities 87 866 353 526 807 87 339 546 48 375 868 297 371 48 078 497 80 237 934 297 657 79 940 277

Total equity and liabilities 88 484 519 1 144 973 87 339 546 48 971 442 892 945 48 078 497 80 862 197 921 920 79 940 277



SygNiA LiMiTED reVIeWeD CONDeNseD CONsOLIDaTeD FINaNCIaL sTaTeMeNTs 20


8. Corporate vs third party financial information (cont.)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 as at 31 March 2019 Reviewed as at 31 March 2018 Audited as at 30 September 2018

Total r’000s

Corporate r’000s

Third-party r’000s

Total r’000s

Corporate r’000s


Total r’000s

Corporate r’000s


revenue 229 268 229 268 - 207 308 207 308 - 421 913 421 913 -

expenses (165 358) (165 358) - (137 032) (137 032) - (278 886) (278 886) -

Profit from operations 63 910 63 910 - 70 276 70 276 - 143 027 143 027 -

Investment contract income 2 029 673 - 2 029 673 526 189 - 526 189 4 954 592 - 4 954 592

Transfer to investment contract liabilities (2 029 673) - (2 029 673) (526 189) - (526 189) (4 954 592) - (4 954 592)

Interest income 13 079 13 079 - 12 820 12 820 - 26 432 26 432 -

Other investment loss (4 413) (4 413) - (19 067) (19 067) - (6 979) (6 979) -

Finance costs (5 588) (5 588) - (8 002) (8 002) - (14 133) (14 133) -

Profit before tax 66 988 66 988 - 56 027 56 027 - 148 347 148 347 -

Income tax expense (22 787) (22 787) - (19 029) (19 029) - (47 378) (47 378) -

Total profit and comprehensive income for the period

44 201 44 201 - 36 998 36 998 - 100 969 100 969 -



9. Fair valueThe 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 Fair value hierarchy of inputs

Equities Quoted closing price in active market

Not applicable – prices are publicly available

Level 1

Fixed interest securities Quoted closing price in active market


Level 1

Cash and cash equivalents

Quoted closing price in active market


Level 1

Collective investment schemes

Quoted exit price provided by the fund manager


Level 2

Debentures Quoted net asset value provided by the fund manager

Not applicable – underlying asset values are publicly available

Level 2

hedge funds Quoted net asset value provided by the fund manager

Not applicable – underlying asset values are publicly available

Level 2

Investments in insurance policies

Prices are obtained from the insurer of the particular investment contract

Not applicable – prices provided by registered long-term insurers

Level 2

Investment contract liabilities

Current fair value of underlying financial asset that is linked to the liability

Not applicable Level 2

Investment contract portfolio debtors and accrued interest

Current fair value of underlying financial asset that is linked to the debtor

Not applicable Level 2

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).



9. Fair value (cont.)

Reviewed - Financial assets at fair value through profit or lossas at 31 March 2019

Level 1r’000s

Level 2r’000s

Level 3r’000s

Totalr’000s

Investments linked to investment contracts 33 138 224 53 761 054 - 86 899 278

Investments (Corporate) 81 702 180 803 - 262 505

33 219 926 53 941 857 - 87 161 783

Reviewed - Financial liabilities at fair value through profit or lossas at 31 March 2019

Investment contract liabilities 31 332 794 53 369 613 - 84 702 407

Third-party liabilities arising on consolidation of unit trust funds 1 805 430 - - 1 805 430

33 138 224 53 369 613 - 86 507 837

Audited - Financial assets at fair value through profit or lossas at 30 September 2018



26 755 927 53 223 582 - 79 979 509

Audited - Financial liabilities at fair value through profit or lossas at 30 September 2018



27 992 750 51 682 821 - 79 675 571



9. Fair value (cont.)

Reviewed - Financial assets at fair value through profit or loss as at 31 March 2018



20 707 126 27 045 552 - 47 752 678

Reviewed - Financial liabilities at fair value through profit or loss as at 31 March 2018



20 704 233 26 704 892 - 47 409 125

10. related-party transactionsRelated-party transactions similar to those disclosed in the Group’s financial statements for the year ended 30 september 2018 took place during the period under review, except for the following:

During the period, Sygnia Limited made an offer to a director, Murad Sirkot, in terms of the employee share option scheme, to acquire 251 258 ordinary shares at a price of R7.96, which was the 30-day Volume Weighted Average Price of Sygnia Limited as at the date of offer.

11. Events subsequent to the reporting dateThe 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

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: standard Bank of south africa Limited

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: [email protected]

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: [email protected]

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: [email protected]

Reviewed Condensed Consolidated Financial Statements 2019

www.sygnia.co.za

reviewed condensed consolidated financial statements · since inception in november 2015 to march...

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