Sygnia : Integrated Report - 2022

Integrated Report 2022

Report

1. Scope of our integrated report
2. Chairperson's report

6 Chief executive officer's report

1. Our Group
2. Our business

1. Corporate governance

1. Business sustainability

37 Notice of the annual general meeting

1. Form of proxy

1. Glossary of terms

46 Audited consolidated annual financial statements

Highlights

For the year ended 30 September 2022

R285.1bn -3.8%

2021: R296.4 billion

Assets under management and administration

R808.9m +9.7%

2021: R737.2 million Revenue

R287.4m +19.3%

2021: R240.9 million Profit after tax

191.3c +12.1%

2021: 170.7 cents

Basic earnings and headline earnings per share

210c +55.6%

2021: 135 cents

Total dividend per share

Turning ordinary savers into extraordinary investors.

2	Sygnia Integrated Report 2022

Scope of our integrated report

This report has been designed to communicate Sygnia's objectives, value creation proposition and business sustainability to all stakeholders to enhance their understanding of the Group.

Introduction

Sygnia Limited, which includes all its subsidiaries ("Sygnia" or "the Group"), is pleased to present its Integrated Report covering the performance of the Group from 1 October 2021 to 30 September 2022. This report provides an overview of the Group's financial, governance, environmental and social components for stakeholders to assess the Group's ability to create and sustain value over the short, medium and long term.

Framework and guidelines

The 2022 Integrated Report has been compiled in accordance with the International Integrated Reporting Framework ("IIRF"), discussion papers issued by the International Integrated Reporting Council ("IIRC") and the Integrated Reporting Council of South Africa ("IRCSA"), and as required by the applicable legislation, the report indicates how the Group has applied the principles of the King IV Report on Corporate Governance ("King IV"). The King IV principles have been applied and explained as outlined in the relevant sections of this report.

The IIRC recommends reference to the six capitals or stores of value that a company can use in the production of its goods and services, namely: financial capital, human capital, intellectual capital, social and relationship capital, natural capital, and manufactured capital. Only the first four are regarded as relevant to Sygnia and are thus covered in this report.

The financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"), Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the requirements of the Companies Act of South Africa, No. 71 of 2008, as amended ("the Companies Act") and the Listings Requirements of the Johannesburg Stock Exchange ("JSE").

Assurance

The financial statements have been audited by Mazars, whose unmodified opinion is included on page 53 of this Integrated Report.

Forward-looking statements

The 2022 Integrated Report contains references to forward- looking statements. These statements are subject to risks and uncertainties, which may result in the actual performance being materially different from what has been expressed or implied by such statements. Stakeholders are thus advised not to place undue reliance on any forward-looking statements.

Sygnia will not update or revise any forward-looking statements, even if new information becomes available, other than as required in terms of the Listings Requirements of the JSE.

Statement of responsibility

The Audit and Risk Committee acknowledges its oversight responsibility, on behalf of the board of directors ("the board") to assess the integrity of this Integrated Report. The Audit and Risk Committee has accordingly applied its mind to the report and believes that it appropriately and sufficiently addresses all material issues and fairly presents the integrated performance of Sygnia for the year ended 30 September 2022, within the scope and boundaries mentioned in the preceding paragraphs.

The Audit and Risk Committee recommended this Integrated Report to the board for approval.

Board assurance and approval for publication

The board has established processes and policies appropriate for Sygnia to ensure that the Group applies the principles outlined by King IV. The board confirms the implementation of the King Code through the application of the King Code disclosure and application regime. The board of directors further confirms that Sygnia complies with the Companies Act, in all material respects, and is operating in conformity with its Memorandum of Incorporation. The board is ultimately responsible to ensure the integrity of the 2022 Integrated Report and has approved the final report.

The directors have applied their collective minds in the preparation and presentation of this report in accordance with the requirements of the IIRF and have satisfied themselves of the materiality, accuracy and balance of disclosures in terms of the performance of Sygnia for the year ended 30 September 2022.

The 2022 Integrated Report was approved by the board on 5 December 2022 for publication.

Magda Wierzycka	David Hufton
Chairperson	Chief Executive Officer

Sygnia Integrated Report 2022

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Chairperson's report

I don't think I am exaggerating when I say that no one expected Russia to attack Ukraine so soon after the global emergence from the Covid-19 pandemic. No one anticipated the immense implications for global economies, nor the cost to the people of Ukraine. Rocketing oil and gas prices, massive food price increases and supply chain disruptions all contributed to double-digit inflation numbers.

The speed with which peace turned to "war" left most governments struggling to sustain growth and to pacify an increasingly panicked population. The IMF lowered its expectation for global growth in 2022 from 4.4% to 3.2%, and from 3.8% to 2.7% in 2023. Against this background, countries such as China used the distraction to consolidate and centralise political power.

South Africa has not been immune. Inflation has exceeded 7%, growth has been revised downwards, the rand has fallen in value and transport and food costs have risen, with most of our citizens feeling poorer. The strain of an unreliable electricity supply has added to national economic woes. The country also faces grey-listing by the Paris-based Financial Action Task Force, a global institution that oversees compliance with anti- money laundering and counter-terrorism financing measures. Despite many steps being taken by government, it is probably a case of too little too late, with grey-listing almost inevitable. This will make it more difficult for South African companies, banks and individuals to transact internationally.

Unfortunately, economic turbulence normally translates into more constrained fiscal policies and a negative impact on

investment markets. Interest rates have risen dramatically in response to higher inflation, while markets have fallen at a record-breaking pace. There is almost nowhere to hide, with the technology and healthcare sectors suffering the most. Many investors simply opted for the perceived protection of the US dollar, leading to the depreciation of almost all other currencies.

Unsurprisingly, most foreign investors do not believe a long- term investment case can be made for South Africa and other emerging markets. The same applies to China, where political risks have increased substantially.

It is not a stretch to say that the shift in geopolitical relationships reflects a swing back to the "Cold War" era: relationships are strained and increasingly polarised, and no short-term improvements are likely. This has longer-term implications for inflation, market volatility and supply chain disruptions than the Russia/Ukraine war in isolation.

On a more positive note, borders have opened up and travel has resumed, and South Africa has been a beneficiary of renewed tourism. Higher global commodity prices supported higher revenue collection, a pleasant surprise, although most of the

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/Chairperson's report

windfall tax receipts are expected to fall away over the next two years. The strategy outlined in the 2022 Medium-Term Budget Policy Statement (MTBPS) focused on reducing fiscal risks, narrowing the budget deficit and stabilising debt and proposed measures to improve economic growth and provide funding for infrastructure and service delivery programmes. Real GDP growth recovered to 4.9% in 2021, following a contraction

of 6.3% in 2020. Unfortunately, projected economic growth has been revised downwards since the Budget speech, from 2.1% to 1.9%. Growth continues to be impeded by the slow implementation of promised economic reforms, as well as events such as the July 2021 riots and the April 2022 floods in KwaZulu-Natal. The MTBPS promised much-needed debt relief for Eskom, necessary to shore up the finances of the company drowning in debt. The budget also allocated additional funding for health, education, safety and security.

In writing this report I am acutely aware that it delivers more negative than positive messages. Unfortunately, we are living in unprecedented times - at least for many who grew up in a period of relative stability and prosperity.

The question on many people's minds is what to do with their investments. The advice to sit tight and do nothing is wearing thin, with most investors no longer focused on growth but on capital preservation. This is clearly not great news for asset managers, who depend on investors' confidence to support their products and investment strategies."

In light of the above, it is important to recognise that Sygnia's business, like that of other asset managers, is cyclical. Its revenues are very dependent on the level of the markets

• increasingly so when its assets under management and administration have risen to almost R300 billion. In many ways, the market itself is Sygnia's largest client. After reaching record highs at the end of 2021, the fall in value across all asset classes has led to increasingly challenging trading conditions, but Sygnia has held its own. While the institutional market continues to shrink as a result of retrenchments and a lack of new job creation, inflows due to contributions seem to have reached equilibrium with the level of outflows caused by retrenchments, withdrawals and retirement. Retirement funds have been cutting costs, with services such as additional administration being discontinued despite the risks this creates. The retail division continued to attract assets, as did Sygnia's low-cost umbrella fund proposition. Passive funds are also becoming more of a fixture in the South African investment landscape. And our brand recognition, despite a bare minimum spent on marketing, has never been stronger.

We are under no illusion that the next financial year will be a lot tougher, with more volatility in our financial results. We are prepared for that, as Sygnia is a resilient, well-funded business that is ready to face headwinds as and when they arise.

In the meantime, the management team must be congratulated for their dedication and effort in delivering sound financial results in 2021/22. The business has never been stronger in terms of skills, expertise and experience across its leadership team, when steady hands and cool heads have been essential.

I would also like to express my gratitude to Sygnia's board of directors for their guidance and assistance in setting out the strategy of the business.

Magda Wierzycka

Chairperson

Sygnia Integrated Report 2022

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