GRUPA SYGNITY Quarterly financial statements for the 3 month period ended December 31, 2015

Transcription

1 GRUPA SYGNITY Quarterly financial statements for the 3 month period ended December 31, 2015

2 LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD

3 Warsaw, February 15, 2016 Ladies and Gentlemen Dear Shareholders It is my pleasure to present you with the financial statements of the Sygnity Group for the 1 st quarter of fiscal year 2015/2016, commenced October 1 and ended December 31, Situation in the public sector continues to be difficult; however we already are noticing several positive elements. Most importantly we are acquiring and successfully delivering ever more projects for clients from this sector, being the partner to many key national administration institutions such as the Ministry of Finance, ZUS Social Insurance Institution, MRPiPS Ministry of Family, Labor and Social Policy, ARiMR Agency for Restructuring and Modernization of Agriculture, Labor Offices and OPS Social Benefits Centers, while in the banking sector to BGK bank and KIR National Clearing House. I am particularly proud of the progress being made in delivering the e-taxes project for the Ministry of Finance. This project is our competency and organizational success. Successive acceptances of applications and modules are confirming the effectiveness of our collaboration with the project team of the Ministry of Finance. The framework supplementary agreement for the e-taxes system, signed in January 2016 and valued at up to PLN 80.7 million, proves that this project is important to the Ordering Party and is being dynamically developed, and our company has the competences as the general contractor. It is worth highlighting that the e-taxes is currently one of the most important projects of the government administration and at the same time a solution authored by Sygnity. Recently we have implemented subsequent functionalities: the Tax Portal (December) and the Mass Channel for Disability Pension Agencies (January). Currently we are working on new elements of the program, such as: the Tax Information System in its portal based part (commissioning planned for February/March), new release of the PFR Prefilled Tax Return expanded with the PIT-38 and PIT-37 tax returns supplemented with the information from the disability pension agencies through the KMdOR Mass Channel for the Disability Pension Agencies (commissioning planned for March 15) and the Register of General Powers of Attorney (planned commissioning date in July). Revenues of the Sygnity Group in Q1 FY 2015/2016 were PLN million (-2.9% y/y). Gross profit on sales was PLN 24.6 million (-4.6% y/y), EBITDA was PLN 11.1 million (+1.6% y/y), EBIT was PLN 6.4 million (+19.4% y/y) and the net profit was PLN 3.4 million (-16.7% y/y). EBITDA margin was 8.0% (+0.4% y/y), EBIT margin was 4.6% (+0.9% y/y), while the net profit margin was 2.5% (-0.4% y/y) as the tax losses from past years were consumed. We are also maintaining the cost discipline all the time. Overhead expenses in Q1 FY 2015/2016 were 7.1% of revenues and were at the lowest level since many quarters. The total overheads (cost of sales and the overhead expenses) in this quarter were 12.3% of revenues and this was the lowest level since two years. In the P1 project (e-health) Sygnity is the company that, in contrast to other contractors, did not have its contract terminated and was not charged with penalties. We assume the project will continue, however in a different format. We are ready to continue our participation in the project and to collaborate with the client on continuation of the selected or all of the components.

4 Among the key contracts signed in Q1 FY 2015/2016 alone one should mention the contract with the BGK bank valued at PLN 54 million including VAT for the Core Banking System and contract for delivery of Microsoft Corporation licenses valued at over EUR 16 million concluded with PKO BP bank and its subsidiaries. Another key contract is the agreement concluded with the ZUS Social Insurance Institution, valued at PLN 53 million including VAT, concerning implementation of an IT solution consisting of integrated data warehouse that will also be the data feed to the actuarial system, and the contract valued at nearly PLN 32 million including VAT concluded with ARiMR for maintenance, development and modification of the EBS (ERP) solution. In turn, the strength of our position in the energy sector is highlighted by the contracts signed with the Energa Group companies. These contracts concerned support and development of systems that were implemented by Sygnity and delivery of Microsoft software with licenses. The value of the latter contract exceeds PLN 23 million. Another agreement worth mentioning is the contract with PSE Innowacje, which includes adaptation of the SIRE (System Informatyczny Rynku Energii Energy Market Information System) in the area of inter-system exchange to the auction procedures of Joint Allocation Office. New contracts allow us to consistently rebuild our order portfolio. Revenues for the remaining quarters of FY 2015/2016 from contracts signed by February 2, 2016 are PLN million and are 8.7% higher from comparable backlog a year ago. Our order book is becoming more and more diversified as to the share in key sectors, clients, scope of products and services supplied, and value of orders. This diversification allows us to also assume better profitability of our future deliverables. As of the end of December 2015, the Sygnity Group held PLN 45.8 million in cash and total financial debt was reduced to PLN 43.8 million. We have commenced the new fiscal year, as we were forecasting, in a good way the positive elements that we have already mentioned several times, that is sales effectiveness, acquired new high profile contracts, high backlog, cost discipline and lasting reduction of overheads are already yielding noticeable results. All these elements will be contributing to achieving positive dynamics both on the revenue side and in profits in the coming quarters of this fiscal year. We have also completed the work on the five-year Strategic Plan. The document is ready and was accepted by the Supervisory Board. The strategy contains growth and acquisition elements as well as further sector and product diversification. Due to the present dynamic situation in the public sector we have decided to change its publication date. We assume that the strategy will be presented to the market along with the publication of our results for H1 FY 2015/2016. We will be supported in fulfilling our new strategy by Mr Jan Maciejewicz, one of the most experienced IT industry managers in Poland, who has joined the Management Board on February 12, I wish to use this opportunity to thank Mr Bogdan Zborowski for his commitment and personal contribution to building the value of Sygnity. I am glad to have had the opportunity to collaborate with such a top class manager and wish him all the best in his future professional plans. In the opinion of the Management Board the current Sygnity S.A. stock price still does not reflect the Group s growth potential and plans, its backlog level and market prospects. This is why after expiry of the quiet period related to publication of these financial statements we shall continue the share buyback. At present the company holds a total of treasury shares constituting 4.06% of the share capital. And finally, on behalf of the Management Board of Sygnity S.A. and personally, I wish to thank our shareholders, clients, the Supervisory Board and employees for the trust they vested with us and their commitment to the growth of the Sygnity Group. Yours sincerely, Janusz R. Guy President of the Management Board

5 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the 3 month period ended December 31, 2015

6 Interim condensed financial statements for the 3 month period ended December 31, 2015 These interim condensed financial statements were approved for publication by the Management Board of Sygnity S.A. Janusz R. Guy President of the Management Board Magdalena Bargieł Vice-President of the Management Board for HR Roman Durka Vice-President of the Management Board Jakub Leśniewski Vice-President of the Management Board for Finance Jan Maciejewicz Vice-President of the Management Board Bogdan Zborowski Vice-President of the Management Board for Sales Warsaw, February 15, 2016

7 Table of contents Selected financial data... 2 Consolidated statement of comprehensive income... 3 Consolidated balance sheet... 4 Consolidated statement of changes in equity... 5 Consolidated statement of cash flows... 6 INFORMATION AND EXPLANATORY NOTES... 7 Parent company data... 7 Basis for preparation of the financial statements Going concern Functional and reporting currency Important estimates and accounting assessments Composition of the Group Information concerning meeting the covenants for continuation of credit agreements and bonds issued Changes to accounting principles and to data presentation Information on operating segments Revenue from sales Costs by type and cost of goods and services sold Other operating revenues Other operating expenses Financial expenses Deferred income tax Tangible fixed assets Intangible assets Goodwill Inventory Trade receivables and other receivables Cash and cash equivalents Equity Employee share schemes Credits and loans Bonds and other financial liabilities Provisions Trade and other liabilities Transactions with associates Contingent liabilities Claims and disputes Events after the reporting period NOTES AND SUPPLEMENTAL INFORMATION TO THE FINANCIAL STATEMENTS Separate statement of comprehensive income Separate balance sheet Separate statement of changes in equity Separate statement of cash flows

8 Selected financial data Period: Period: Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 to Dec. 31, 2015 to Dec. 31, 2014 PLN 000 PLN 000 EUR 000 EUR 000 Revenue from sales Operating profit Profit before tax Net profit Weighted average number of shares Basic and diluted net earnings per share (in PLN) As of As of As of As of Dec 31, 2015 Sep 30, 2015 Dec 31, 2015 Sep 30, 2015 ASSETS PLN 000 PLN 000 EUR 000 EUR 000 Audited Audited Fixed assets Current assets LIABILITIES Equity Long-term liabilities Short-term liabilities Period: Period: Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 from Oct. 1, 2015 from Oct. 1, 2014 to Dec 31, 2015 to Dec 31, 2014 to Dec 31, 2015 to Dec 31, 2014 PLN 000 PLN 000 EUR 000 EUR 000 Audited Cash flows Cash flows from operating activities Cash flows from investing activities (1 950) (3 190) (457) (758) Cash flows from financing activities (21 858) (5 127) The selected financial data presented above supplement the consolidated financial statements prepared in compliance with IFRS and have been converted to EURO according to the following simplified principles: Individual assets and liabilities items for the balance sheet as of the balance sheet day according to the average exchange rate in force as of the last balance sheet day, announced by the National Bank of Poland: as of December 31, , and as of September 30, respectively. Individual items of the statement of comprehensive income and statement of cash flows for the period commenced October 1 and ended December 31 of the year concerned according to average exchange rate calculated as arithmetic average of the exchange rates announced by the National Bank of Poland for the last day of the month in a given fiscal year; for the period commenced October 1, 2015 and ended December 31, , and for the period commenced October 1, 2014 and ended December 31, respectively. 2

9 Consolidated statement of comprehensive income Note Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Revenue from sales Revenue from sales of products and services Revenue from sales of goods and materials Cost of products, goods and materials sold Cost of producing the products and services sold (93 527) ( ) Value of goods and materials sold (21 645) (16 524) 9 ( ) ( ) Gross profit on sales Cost of sales 9 (7 268) (5 709) Overhead costs 9 (9 991) (13 263) Other operating income Other operating expenses 11 (422) (632) Result on operations Financing income Financing expenses 12 (929) (1 309) Result on financing operations (840) (1 104) Share of result of joint-venture (7) (512) Profit before tax Income tax 13 (2 991) (1 251) Net profit Other comprehensive net income FX differences from recalculation of foreign operations Total income Net profit for: - shareholders of the parent company stakeholders without control 42 (6) Total comprehensive income for: - shareholders of the parent company stakeholders without control 42 (6) Basic and diluted net earnings per share (in PLN)

10 Consolidated balance sheet Note As of As of Dec. 31, 2015 Sep. 30, 2015 Audited ASSETS Fixed assets Tangible fixed assets Intangible assets Goodwill Investment in joint-venture Non-consolidated subsidiary Long-term receivables Deferred income tax assets Current assets Inventory Trade receivables and other receivables Cash and short-term deposits TOTAL ASSETS LIABILITIES Equity 21 Share capital Treasury shares 20 (5 929) (5 929) Share premium Spare capital Reserve capital FX differences from conversion of subsidiaries (39) (54) Losses carried forward (5 355) (8 754) Equity (allocated to shareholders of the parent company) Non-controlling interests Long-term liabilities Credits and loans Bond liabilities Financial lease liabilities Provisions Provision for deferred income tax Short-term liabilities Credits and loans Trade liabilities and other liabilities Income tax liabilities Bond liabilities Financial lease liabilities Provisions Deferred income Total liabilities TOTAL LIABILITIES

11 Consolidated statement of changes in equity PLN'000 Share capital Shares bought back for the options program Attributed to shareholders of the parent company Share premium Spare capital Reserve capital FX differences from conversion of subsidiary units Retained earnings / (losses carried forward) Equity attributed to shareholders of the parent company Non-controlling interests As of Oct. 1, (5 560) (88) Total comprehensive income: Net profit (6) FX differences from conversion of foreign entities Management share options valuation (36) (36) - (36) As of Dec. 31, (5 560) As of Oct. 1, (5 929) (54) (8 754) Total comprehensive income: - Net profit FX differences from conversion of foreign entities TOTAL EQUITY As of Dec. 31, (5 929) (39) (5 355)

12 Consolidated statement of cash flows Cash flows from operating activities Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Profit before tax Adjustments for: Share in financial results of entities consolidated using the equity method Depreciation Interest income and expenses Other adjustments - (804) Change in working capital * Net cash generated from operating activities Income tax (paid) / refunded (3 515) - Cash flows from investing activities Inflow from sales of tangible fixed assets and intangible assets 53 - Purchase of tangible fixed assets and intangible assets (41) (683) R&D expenses (1 962) (2 450) Outflow for purchase of shares and interests - (60) Loans repaid - 3 (1 950) (3 190) Cash flows from financing activities Inflows from issue of debt securities Outflows for credits and loans incurred (20 498) (863) Repayment of financial lease liabilities (190) (306) Interest paid (1 170) (347) (21 858) Total net cash flows Cash change of presentation of joint-venture - (3 097) Cash at the beginning of the period FX differences from conversion of foreign operations Cash at the end of the period * Change in working capital Change in provisions 508 (623) Change in inventory (13 439) Change in receivables Change in liabilities Change in prepayments and accruals Total

13 INFORMATION AND EXPLANATORY NOTES Parent company data Sygnity S.A. ( the Parent Company, Sygnity or the Company ) is a joint stock company incorporated in Poland. The fiscal year of the Parent Company commences on October 1 and ends on September 30. These interim condensed consolidated financial statements on the day of and for the period of 3 months ended on December 31, 2015 include the condensed financial statements of the Parent Company and its subsidiaries (collectively referred to hereinafter as the Group ). The Company was registered under the number KRS and received the statistical number REGON The core business of the Sygnity Group is software, and computer hardware consultancy. The Parent Company and the entities constituting the Group have been established for an indefinite term. The Supervisory Board As of the day of preparation of these financial statements the Supervisory Board of the Company was composed of: Tomasz Sielicki - Chairman of the Supervisory Board Kristof Zorde - Vice-Chairman of the Supervisory Board Piotr Rymaszewski - Member of the Supervisory Board Piotr Skrzyński - Member of the Supervisory Board Ryszard Wojnowski - Member of the Supervisory Board The Management Board As of the day of publication of these financial statements the Management Board was composed of: Janusz R. Guy - President of the Management Board Magdalena Bargieł - Vice-President of the Management Board for HR Roman Durka - Vice-President of the Management Board Jakub Leśniewski - Vice-President of the Management Board for Finance Jan Maciejewicz - Vice-President of the Management Board Bogdan Zborowski - Vice-President of the Management Board for Sales On February 12, 2016, the Supervisory Board has adopted resolutions on appointment of the following persons as Members of the Management Board of the Company: 1. Mr Janusz R. Guy as President of the Management Board; 2. Ms Magdalena Bargieł as Vice-President of the Management Board for HR; 3. Mr Roman Durka as Vice-President of the Management Board; 4. Mr Jakub Leśniewski as Vice-President of the Management Board for Finance; 5. Mr Jan Maciejewicz as Vice-President of the Management Board; for the new common three year term of office that will commence on the day of the General Meeting of Shareholders approving the financial statements for the fiscal year ended September 30, Mr Janusz R. Guy, Ms Magdalena Bargieł, Mr Roman Durka and Mr Jakub Leśniewski are currently holding the positions of Members of the Management Board of the Company during the present term under which they will cease to hold their positions on the day of the General Meeting of Shareholders approves the financial statements for the fiscal year ended September 30,

14 Basis for preparation of the financial statements These interim condensed consolidated financial statements were prepared in compliance with the International Financial Reporting Standards ("IFRS") approved by the European Union ( EU ), and in particular in compliance with IAS (International Accounting Standard) 34 Interim Financial Reporting standard ( IAS 34 ). These interim condensed consolidated financial statements do not include all the information and disclosures required in annual consolidated financial statements and shall be reviewed together with the consolidated financial statements of the Group prepared in compliance with the IFRS for the year ended September 30, These interim condensed consolidated financial statements of the Group cover the period of 3 months ended December 31, 2015, and contain comparative data for the period of 3 months ended December 31, 2014 and as of September 30, These interim condensed consolidated financial statements have been approved by the Management Board of the Parent Company on February 15,

15 1. Going concern These interim condensed consolidated financial statements were drawn up on going concern assumption for Group s companies in foreseeable future. 2. Functional and reporting currency The functional currency of the Parent Company and its subsidiaries, with the exception of UAB Baltijos Kompiuteriu Centras included in these interim condensed consolidated financial statements, and the reporting currency of these condensed consolidated financial statements is the Polish zloty ( PLN ). The functional currency of UAB Baltijos Kompiuteriu Centras is the euro ( EUR ). Items in financial statements of UAB Baltijos Kompiuteriu Centras are converted using the applicable exchange rates to the reporting currency of the Sygnity S.A. Group. These interim condensed consolidated financial statements are presented in Polish zlotys ( PLN ). All values are presented in thousands of zlotys, unless indicated otherwise. 3. Important estimates and accounting assessments Preparation of these interim condensed consolidated financial statements requires the Management Board to use its judgment, estimates and assumptions influencing the application of the accounting principles adopted and reporting of the values of assets, liabilities, revenues and expenses, the actual values may differ from the estimated values. The important judgments by the Management Board concerning the application by the Group of the accounting principles and the main sources of uncertainty relating to estimates are in line with those described in the consolidated financial statements for the year ended September 30, Fair value measurement When determining the fair value of a component of assets or liabilities, the Group to a largest extent is using the observable market data. The fair value measurement is classified on different levels depending on the input data used for valuation. Level 1: prices quoted (unadjusted) on active markets for identical assets or liabilities. Level 2: inputs other than quoted market prices included in level 1, that are observable for the asset or liability, either directly (e.g. quotes) or indirectly (e.g. data based on quotes). Level 3: inputs for measurement of an asset or liability that are not based on observable market data (unobservable inputs). If the inputs for fair value measurement of a given component of assets or liabilities are classified at different levels of the fair value hierarchy, then the fair value measurement is classified entirely at the lowest level of fair value hierarchy in which the inputs significant to such measurement were classified. The Group recognizes the transfers between levels of fair value hierarchy at the end of the reporting period in which the change concerned took place. 9

16 4. Composition of the Group As of December 31, 2015, the Company directly held interests and shares in the following subsidiaries, codependents and affiliates: # Company name Registered seat Nature of business Consolidation method Share of equity as of Dec 31, Geomar S.A ICD Comp Consulting Sp. z o.o. in liquidation 1) Sygnity Business Solutions S.A. 2) UAB Baltijos Kompiuteriu Centras Sygnity International Sp. z o.o. 6 Enhandel Sp. z o.o. 3) Szczecin, Poland Warsaw, Poland Zielona Góra, Poland Vilnius, Lithuania Warsaw, Poland Warsaw, Poland Spatial information, geodesy and cartography. Software and services for the banking sector. Delivery of software and IT services. Computerization services to the industrial, trade and public administration sectors. Software and hardware sales on international markets. Full Non consolidated Full Full Full Electricity trading. Non consolidated Budimex S.A. Sygnity S.A. Sp. j. Warsaw, Poland Special purpose vehicle for investment project. Equity method Emtal Sp. z o.o. 4) Gdańsk, Poland Supplier and integrator of systems for public transport. n/a ) On February 26, 2013 the Ordinary General Meeting of Partners adopted a resolution on dissolution and liquidation of the company, setting the liquidation process commencement date as February 26, ) On November 5, 2015 a change of company name from Max Elektronik S.A. to Sygnity Business Solutions S.A. was registered. 3) On September 26, 2014 the Enhandel Sp. z o.o. company was established. The company is not conducting any operations yet. The Group decided not to consolidate the company due to the fact that its financial data is insignificant from the perspective of the consolidated financial statements. 4) So far the company was presented as associate due to lack of representatives of the Group on its Management Board. The Group has no control over its finances or operations policies. During this reporting period the Group has also lost its ability to exert significant influence on the policy and operations of the entity, thus it made the decision to discontinue its consolidation, and in consequence to reclassify the investment in the company to financial assets held for sale. As of December 31, 2015 due to the use of prudent valuation principle, the total interest in the company is subject to impairment write-down in amount of Information concerning meeting the covenants for continuation of credit agreements and bonds issued As of December 31, 2015, the Group has met the terms and conditions for continuation of credit agreements in regard to covenants and other liabilities resulting out of the credit agreements and bonds issued. In the opinion of the Management Board all covenants and other liabilities resulting from the credit agreements and bond issues shall be met in the foreseeable future. 10

17 6. Changes to accounting principles and to data presentation In Q1 FY 2015/2016 the Group was not making any changes to accounting principles and to data presentation except for change of classification of part of overhead expenses and costs of products and services sold to cost of sales. As a result of this change the overhead expenses for the period of 3 months ended December 31, 2015 decreased by 263, costs of products and services sold decreased by 83, and the cost of sales increased by Information on operating segments Information on operating segments for the period of 3 months ended December 31, PLN'000 IT segment Others Exclusions and unassigned items Total operations Period: from Oct. 1, 2015 to Dec. 31, 2015 Segment sales Sales between segments - (64) - (64) Sales to external clients Segment operating expenses ( ) (6 768) - ( ) Segment profit Other net operating revenues / (expenses) 195 (259) - (64) Operating profit before tax and net financial expenses Net financial expenses - - (840) (840) Share in profit of associates - - (7) (7) Profit / (loss) before tax (847) Income tax - - (2 991) (2 991) Net profit / (loss) (3 838) Period: from Oct. 1, 2014 to Dec. 31, 2014 Segment sales Sales between segments Sales to external clients Segment operating expenses ( ) (3 063) - ( ) Segment profit Other net operating revenues / (expenses) 198 (24) Operating profit before tax and net financial expenses Net financial expenses - - (1 104) (1 104) Share in profit of associates - - (512) (512) Profit / (loss) before tax (1 616) Income tax - - (1 251) (1 251) Net profit / (loss) (2 867)

18 8. Revenue from sales Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Revenue from sales of products and services Licenses and software Implementation services Maintenance services Other Revenue from sales of products and materials Computer hardware Revenues are primarily generated on the territory of Poland. Around 3.5% of sales revenues in the in the period of 3 months ended December 31, 2015 came from clients with no registered seat on the territory of Poland. Majority of these revenues came from sales of implementation services and computer hardware. 9. Costs by type and cost of goods and services sold Costs by type Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Materials and energy consumed (22 839) (37 739) Third party services (43 349) (36 283) Remuneration (30 644) (32 918) Employee benefits (4 723) (5 349) Depreciation (3 837) (3 936) Taxes and levies (690) (582) Other (4 704) (3 897) Cost of products and services sold ( ) ( ) Cost of sales (7 268) (5 709) Overhead cost (9 991) (13 263) (93 527) ( ) Third party services are mainly costs of subcontractors, costs of upkeeping premises, legal and notary services and telecommunications services costs. 12

19 10. Other operating revenues Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Other operating revenues - write-down of lease liabilities compensations and penalties received material benefits received free of charge out of other titles Other operating expenses Other operating expenses Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Negative FX differences (2) (199) Established provisions for penalties and costs of litigations (401) - Other: - inventory revaluation write-down - (369) - donations (6) (4) - other titles (13) (60) (422) (632) 12. Financial expenses Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Financial expenses Financial expenses on interest, including: - on credits and loans (84) (105) - on bonds and other debt securities (437) (890) - on finance lease (34) (314) - other types of interest (190) - Negative foreign exchange differences (180) - Factoring costs (4) - (929) (1 309) 13

20 13. Deferred income tax As of As of Dec. 31, 2015 Sep.30, 2015 Deferred income tax asset including: Discount of deposit Provision for unutilized holidays Provisions for remuneration, bonuses, awards and others Other prepayments and accruals Receivables and inventory revaluation write-down Provision for warranty services Invoice corrections Negative FX differences resulting out of revaluation - 8 Other differences Tax losses Deferred income tax provision, including: Revaluation of financial assets Positive FX differences resulting out of revaluation Recognition of revenues from long-term contracts Surplus of balance sheet value over tax value of fixed assets and intangible assets Other differences Net deferred tax asset (provision) / asset (645) Tax loss to be deducted in future periods Incurred in / Loss amount Date of expiry Sep 30, 2016 Sep 30, 2017 Sep 30, 2018 Sep 30, 2019 Sep 30, 2020 As of December 31, 2015, the Group has recognized the deferred income tax asset with respect to the total tax losses incurred in the previous periods. At the same time the tax results of the Group allowed for use of the previous years tax losses asset in a total amount of in the first quarter of FY 2015/16. Based on achieved results and forecasts for future taxable profits, in particular related to schedules of long-term contract invoicing, the Management Board of the Parent Company considers consuming of tax losses from the previous years highly likely. On November 25, 2015 the Group received the decision by the Director of the Tax Audits Office of November 20, 2015 concerning the tax liability under Corporate Income Tax for On November 27, 2015 the company settled the liability resulting out of this decision including the accrued interest up to the date of payment in total amount of As of September 30, 2015, the Group recognized a provision for this liability in amount of

21 14. Tangible fixed assets As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Tangible fixed assets Buildings and premises Technical equipment and machinery Means of transportation Other fixed assets Fixed assets under construction As of the balance sheet day the Group held fixed assets used under financial lease agreements. Besides the leased fixed assets, there are no other limitations as to disposition of the fixed assets in possession of the Group. 15. Intangible assets As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Third party licenses Own licenses Trademarks Other intangibles including: Customer relations Product brands WINUEL brand Software under development

22 16. Goodwill As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Goodwill Goodwill acquired with acquisition of GK EMAX Goodwill acquired with merger with PB Polsoft Sp. z o.o Goodwill of Sygnity Technology Goodwill of Support Goodwill of Winuel Goodwill of Aram Goodwill of Geomar Goodwill impairment test Due to occurrence of premises for goodwill impairment, the Group has performed the goodwill impairment test as of September 30, The Group applied the usable value method in the test concerning determination of the recoverable value of cash generating units. The recoverable value of a CGU determined based on calculation of the usable value exceeds its balance sheet value; hence no goodwill impairment write-down was recognized. Due to the fact that the valuation is based to a large extent on forecasted operating and financial results, which are additionally dependent on forecasts concerning the market development, the Management Board pointed to inherent uncertainty related to realization of those forecasts. No goodwill impairment test was performed again as of December 31, 2015, as the Management Board has maintained the assumptions on operating margins taken into account in the test conducted as of September 30, 2015, and has not identified any significant premises that could adversely influence its result. 17. Inventory As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Inventory Goods and materials Semi-products and products in progress Changes to inventory write-down balance in the 3 month period ended December 31, 2015, are presented below: Inventory write-down to the recoverable net value Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Beginning of the period Establishment Release - - End of the period

23 18. Trade receivables and other receivables As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Net long-term receivables Deposits paid Prepayments and accruals Net short-term receivables Trade receivables Tax receivables (VAT, Social Security) Receivables due from clients for work resulting from long-term contracts Other receivables Trade receivables and other receivables Value of services settled for in time Insurances Other titles Prepayments Receivables write-downs (positive value) Gross total receivables The receivables for delivery of goods and services are interest-free. Their fair value does not significantly differ from their balance sheet value. Changes of receivable write-downs during the period of 3 months ended December 31, 2015, are presented below: Period: Period: from Oct. 1, 2015 from Oct. 1, 2014 to Dec. 31, 2015 to Dec. 31, 2014 Receivables write-down At the beginning of period Establishment Release - (200) Utilization - - At the end of period In Q1 of this FY the Group has made additional trade receivables write-downs amounting to PLN thousand. 19. Cash and cash equivalents Cash on bank accounts and bank term deposits are bearing interest at variable rates that depend on the variable interbank interest rates on the domestic market. Bank term deposits are opened for different terms from days up to a month depending on Group s cash requirements. 17

24 20. Equity Share capital As of December 31, 2015, the Parent Company s share capital amounted to and covered fully paid up ordinary bearer shares with a face value of PLN 1 each and due to hyperinflationary revaluation of equity. Shares of all series are equally privileged with respect to dividend, voting rights, and return on capital. Between June 2 and August 11, 2015, the Company acting on power of authorization granted by Resolution nr 7 of the Ordinary General Meeting of the Company of March 31, 2015 on share buyback and authorization granted to the Management Board of the Company (the OGM Resolution ) has repurchased of its own shares. According to the OGM Resolution the Company shares were purchased for the purpose of: a) redemption, b) financing the investment transactions of the Company, in particular for further resale in the takeover and acquisition processes made for the benefit of shareholders/partners in the entities taken over in return for interests/shares in these entities, c) implementation of future incentive systems. The ultimate goal of utilization of Company treasury shares purchased under the Share Buyback Program will be defined by the Management Board of Sygnity S.A. in a separate executive resolution. As a result of the above transactions and taking into account the shares repurchased by the Company earlier on for realization of the incentive programs for , as of December 31, 2015, the company held in total of its own shares, constituting a 3.08% share in the share capital and 3.08% of the votes at the General Meeting of Sygnity S.A. Shareholder structure To the best of knowledge of the Management Board of the Company on basis of information received from the shareholders on power of article 69 section 1 of the Public Offering Act, i.e. when they exceed the threshold of 5% of the total number of votes and are required to inform the Company about the change of number of shares held, the structure of shareholders holding directly or indirectly through subsidiary companies a minimum of 5% of the total number of votes at the General Meeting of the Company was as follows: Shareholder As of December 31, 2015 As of September 30, 2015 No. of shares % votes No. of shares % votes Legg Mason Towarzystwo Funduszy Inwestycyjnych S.A Quercus Towarzystwo Funduszy Inwestycyjnych S.A PKO BP Bankowy Otwarty Fundusz Emerytalny ING Otwarty Fundusz Emerytalny *Others Total * Including treasury repurchased by the Company. Treasury shares As of December 31, 2015, the Company held treasury shares. After the balance sheet day, i.e. December 31, 2015 the Company repurchased shares for a total price of

25 21. Employee share schemes 2011 Program On June 30, 2011, the Ordinary General Meeting of Shareholders of the Company has adopted a resolution on defining the principles of execution of by the Company of the Motivation Program for years The basic principles of the program, specified in the abovementioned resolution (regulatory filing 47/2011) are presented in Note 27 to the consolidated financial statements for the fiscal year ended September 30, Pursuant to the decision of the Management Board of December 11, 2012 (regulatory filing 46/2012), execution of the last part of the incentive program scheduled for 2013 was abandoned. During the periods of 3 months ended December 31, 2014, and as of December 31, 2015 no options were granted or exercised. If an option is not exercised, the rights to exercise it expire on December 31, Program On January 10, 2013 the Ordinary General Meeting of Shareholders of the Company adopted a resolution on establishment of rules of execution of the Incentive Program for fiscal year 2012/2013 by the Company. The basic principles of the program referred to in the abovementioned resolution (regulatory filing 3/2013) include: a. The persons entitled to participate in the Options Program are the members of the Management Board of the Company; b. The maximum number of shares in the program may not exceed shares of the Company; c. The entitled persons shall have the right to exercise the options on condition that the Company shall disclose in its consolidated financial statements of the Company's Capital Group approved by the General Meeting, made for the fiscal year, a net profit of at least ; d. The net income shall be calculated without considering the financial effects of events unrelated to the normal operation of the Company; e. The share price under the options program will be equal to PLN 15 (not in thousands); f. The Supervisory Board shall supervise the implementation of this program and shall be directly responsible for granting the rights; g. The condition of execution of the Program in its full scope is the acquisition by the Company of up to of its own shares under the terms defined in the Resolution no. 24 of the Ordinary General Meeting of January 10, 2013; h. In case of failure to exercise an option, the resulting right expires on September 30, On May 19, 2014 the Supervisory Board of Sygnity S.A. granted the Members of the Management Board of Sygnity the options for shares under this Program. According to the Supervisory Board, the General Premise for granting the Options under the Program was met. During the period of 3 months ended December 31, 2015 no options were exercised. 19

26 22. Credits and loans Interest rate Repayment deadline As of As of Dec. 31, 2015 Sep. 30, 2015 Long-term Audited Loan De Lage Landen Leasing Polska S.A. Short-term 7% effective May 25, Overdraft facilities including: ING Bank Śląski SA Deutsche Bank Polska SA Renewable credit ING Bank Śląski SA Loan WIBOR 1M+margin WIBOR 1M+margin WIBOR 1M+margin Up to 12 months Mar 31, 2016 Mar 31, De Lage Landen Leasing Polska S.A. 7% effective May 25, As of December 31, 2015 the Group had multi-purpose credit lines in 2 banks (Deutsche Bank Polska S.A. and ING Bank Śląski S.A.) totaling As of December 31, 2015 the Group has drawn in the guarantee line. In addition, as of December 31, 2015 the Group had a bank guarantee for , issued by Pekao S.A. bank. As of December 31, 2015 the granted multi-purpose credit lines were secured by assignments of contract receivables and powers of attorney granted to bank accounts. Under the financing agreements the company has undertaken to observe the following covenants, among others: - keeping the value of its equity at not less than , - achieving positive EBITDA for each calendar quarter, - for each calendar quarter meeting the condition of: net financial debt /EBITDA <

27 23. Bonds and other financial liabilities Bond series Date of allocation Redemption date Bond quantity Bond issue date value PLN`000 Bond fair value as of Dec. 31, 2015 PLN`000 Bond series 1/2014 Dec. 19, 2014 Dec. 19, The Bond Issue Program was approved on November 28, 2014 by the Extraordinary General Meeting of Shareholders of the Parent Company. The maximum value of the Program is Under the Bond Issue Program, on December 19, 2014 the Group issued four thousand bonds in the 1/2014 series with face value of 10, in total. Redemption date of the new issue is December 19, The bonds are bearing interest at a floating WIBOR rate for 6-month deposits in PLN plus margin. Bond issue was executed by mbank S.A. under the binding bond issue program agreement. Based on the resolution by BondSpot S.A. the company bonds of series 1/2014 issued on December 19, 2014 for the amount of have been introduced to trading in the alternative trading system on Catalyst on February 23, Provisions As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Long-term Provisions for potential claims in litigations in progress Warranty repairs Provision for retirement and similar benefits Other provisions Short-term Provisions for potential claims in litigations in progress Warranty repairs Provision for penalties Provision for retirement and similar benefits The Group establishes provisions for the expected warranty service expenses and costs of warranty repairs. The assumptions for the estimates for warranty services and repairs were determined based on current levels of sales and up to date information about the costs of warranties incurred in the past periods taking into account the customer segments and their specifics. 21

28 Summary of changes in provisions for the period of 3 months ended Dec. 31, 2015 PLN'000 As of Established Used up Released As of Sep. 30, 2015 Dec. 31, 2015 Costs of litigations in progress (3 300) Provision for warranty repairs (2 555) (3 255) Provision for retirement and similar benefits Provision for penalties Other Total (5 855) (3 255) of which short-term of which long-term As of Established Used up Released As of Sep. 30, 2014 Dec. 31, 2014 Costs of litigations in progress Provision for warranty repairs (1 244) (442) Provision for retirement and similar benefits Provision for penalties (100) (1 781) 183 Total (1 344) (2 223) of which short-term of which long-term Trade and other liabilities As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Short-term Income tax liabilities Trade liabilities Liabilities for taxes, duties, social security and other contributions Remuneration liabilities Other liabilities Accrued costs due to: - costs of completed contracts reviews and audits of financial statements unutilized holidays and overtime bonuses, awards and commissions accrued rents severance pay, non-compete compensation The fair value of trade and other liabilities does not differ significantly from their balance sheet value. 22

29 26. Transactions with associates All transactions between companies of the Group have been excluded from these consolidated financial statements. The Company and its subsidiaries have no other transactions with associates from outside the Capital Group. 27. Contingent liabilities Guarantees, bills of exchange, sureties Contingent liabilities As of As of Dec. 31, 2015 Sep. 30, 2015 Audited Liabilities out of issued guarantees including: performance bonds and retention bonds tender bonds payment guarantees Sureties As of December 31, 2015 contingent liabilities of the Group resulted for the most from bank and insurance guarantees issued by the Group, majority of which concerned agreement (contract) performance bonds and retention bonds. The purpose of a performance bond is to secure the claims arising out of non-performance of improper performance of contract. 28. Claims and disputes In the presented reporting period there were no proceedings in progress before the court, competent arbitration authority or public administration body relating to liabilities or receivables of Sygnity S.A. or its subsidiaries, the value of which would be equivalent to at least 10% of the Group s equity. 29. Events after the reporting period Acquisition of shares in the Company by CRON sp. z o.o. On January 18, 2016, the Company was notified by CRON sp. z o.o. with its seat in Warsaw that as result of conclusion of a transaction on the regulated market on January 13, 2016, consisting of purchase of shares in the Company, the share of CRON sp. z o.o. in the total number of votes in Sygnity has exceeded the 5% threshold (hereinafter referred to as the Transaction ). Just before the day of execution of the Transaction, CRON sp. z o.o. held shares in the Company, constituting 4.87% of the share capital and giving right to votes at the General Meeting of Sygnity constituting 4.87% of total votes in the Company. As a result of conclusion of the Transaction CRON sp. z o.o. holds shares in the Company constituting 5.11% of the share capital and giving right to of votes at the General Meeting of the Company constituting 5.11% of the total votes in the Company. 23