| Tue 28 Nov 2017, 9:15 | | DEVELOPMENT BANK OF SOUTHERN AFRICA - INTERIM REVIEWED RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2017 |
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INTERIM REVIEWED RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2017
Development Bank of Southern Africa Limited
Registration number: 1600157FN
JSE Company Code: BIDBS
The Development Bank of Southern Africa Limited: Reviewed results for the
period ended 30 September 2017
Overview
Development Bank of Southern Africa Limited (hereafter referred as “Bank”) is
a state owned entity, whose only shareholder is the Government of the Republic
of South Africa. The summary of the interim financial results is published on
SENS to provide information to holders of the Bank’s debt instruments.
Independent review of results by Auditors
The condensed interim financial statements of the Bank for the six months ended
30 September 2017 have been reviewed by the Bank’s auditor, Nkonki Inc. In their
review report, which is available for inspection at the Bank's registered
office, Nkonki Inc. stated that the review was conducted in accordance with
International Standard on Review Engagements 2410, Review of Interim Information
Performed by the Independent Auditor of the Entity, and have expressed a
conclusion on the condensed interim financial statements.
Context of the condensed interim financial statements
Whilst there has been growth in the South African economy in the last quarter,
coming out of the technical recession, business confidence and economic growth
continues to be weak. The main contributing sectors for this growth were
forestry, agriculture and fishing sectors. The Bank continues to suffer the
adverse impact of the subdued economy, resulting into minimised opportunities
for the catalytic infrastructure financing. Consequently, the Bank’s
disbursements to date are below the Bank’s half year target of R9bn.
The Bank will continue to pursue the implementation of its growth strategy
designed to augment disbursements by focusing on its ‘catalytic’ role to enable
sustainable infrastructure development. To give effect to this strategy, the
Bank is increasingly aiming at crowding in third party funding by de-risking
project finance structures, increasing investment in early stage project
development and developing new structured products.
Preparation of the condensed interim financial statements
The condensed interim financial statements have been prepared under the
supervision of Zodwa Mbele, the Acting Chief Financial Officer.
The directors take full responsibility for the preparation and for correctly
extracting the financial information from the underlying reviewed condensed
interim financial statements for inclusion in the SENS announcement.
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Basis of preparation
Accounting policies adopted and methods of computation are consistent with those
applied to the annual financial statements as at 31 March 2017. The condensed
interim financial statements are prepared on the historical cost basis except
that the following assets and liabilities are stated at their fair value:
derivative financial instruments, financial instruments at fair value through
profit and loss, available-for-sale financial assets, land and buildings, post-
retirement medical benefit and funeral benefit obligations measured at actuarial
values. The condensed interim financial statements are in conformity with IAS
34, Interim Financial Reporting. The preparation of condensed interim financial
statement requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and reported amounts of assets
and liabilities, income and expenses. Actual results may differ from these
estimates.
Key impressions of the financial results and activities
For the period ending 30 September 2017, net profit increased by 40% year-on-
year due to an increase in net interest income of 7%, a 39% decrease in
impairment to R 272m (30 September 2017: R443), a net gain on foreign exchange
of R110m (30 September 2016: loss of R473m) and a gain on financial instruments
of R39m (30 September 2016: loss of R131m). The total assets increase of 4.6%
was mostly driven by an increase in development loans to R73.7bn (31 March 2017:
R71.5bn). The total impairment provision for credit losses increased by 6% to
R4.4bn (31 March 2017: R4.1bn). Despite additional impairment charge, the loan
book asset quality remains acceptable and within the expected parameter of 6%
as demonstrated by non-performing loans ratio of 4.4 %( 31 March 2017: 3.3%).
Key highlights of the Bank’s financial performance for the interim period
ended 30 September 2017
40% increase in profitability: R1.5bn (30 September 2016: R1.0bn).
7% increase in net interest income: R1.9bn (30 September 2016: R1.7bn).
Cost to income ratio: 24% (30 September 2016: 18%).
Cash flow generated from operations: R1.7bn (30 September 2016: R1.8bn).
Impairment charge for the year amounting to R272m (30 September 2016: R443m).
11% decrease in sustainable earnings of R1.4bn (30 September 2016: R1.6bn).
Sustainable earnings is net profit adjusted for foreign exchange and revaluation of financial instruments.
Operating income increased by 14% to R2.2bn (30 September 2016: R1.9bn).
Total assets increased by 4.6% to R83.6bn (March 2017 to R87.4bn).
Development loans and equity disbursements was R5.9bn (30 September 2016 R6.7bn).
Return on equity remained significantly unchanged at 8.8% (March 2017: 9.2%).
Debt-to-equity ratio excluding R20bn callable capital of 157.7% (31 March 2017 158.1%)
Debt-to-equity ratio including R20bn callable capital 98.7% (31 March 2017 99.3%).
Callable capital is shares authorised but not yet issued. Debt to
equity ratio is within the Bank’s regulatory limit of 250%.
Events after the reporting period
There were no adjusting events that occurred after the reporting date.
Outlook
The success to the year ending 31 March 2018 hinges on the Bank’s ability to
continue delivering on its mandate, within the low economic growth environment.
The key challenge at this stage will be to meet the disbursement target for the
year. The conditions are likely to persist, thereby putting pressure on the
Bank’s business. The Bank is however well positioned to weather the volatility
through its renewed focus on structured infrastructure solutions, project
preparation, new infrastructure programmes and partnerships.
Condensed Income Statement for the six months ended 30 September 2017
Six months Six months
in thousands of rand ended ended
30 Sept 2017 30 Sept 2016
Reviewed Reviewed
Net interest income 1 904 262 1 777 647
Other income 230 730 673 471
Net foreign exchange gain/(loss) 110 487 (473 714)
Net operating income 2 245 479 1 977 404
Grants (8 045) (7 299)
Net impairment loss on financial assets (272 210) (442 768)
Personnel expenses (376 290) (335 149)
Other expenses (122 485) (133 642)
Depreciation and amortisation (12 101) (17 688)
Profit for the period 1 454 348 1 040 858
Condensed Statement of Comprehensive Income for the
six months ended 30 September 2017
Six months Six months
ended ended
30 Sept 2017 30 Sept 2016
Reviewed Reviewed
Profit for the period 1 454 348 1 040 858
Other comprehensive (loss)/profit (7 052) 69 374
Total comprehensive income 1 447 296 1 110 232
Statement of Financial Position at 30 September 2017
As at As at
in thousands of rand 30 Sept 31 March
2017 2017
Reviewed Audited
Assets
Cash and cash equivalents 3 080 105 2 299 247
Other receivables 500 294 121 982
Investment securities 1 362 090 1 069 085
Derivative assets held for risk management 941 439 846 141
Post-retirement medical benefits investment 46 437 45 251
Equity investments 6 059 527 5 972 509
Development bonds 1 290 592 1 290 319
Development loans 73 712 741 71 505 178
Property and equipment 411 574 415 409
Intangible assets 87 138 87 958
Total assets 87 491 937 83 653 079
Liabilities
Other payables 1 088 735 838 591
Provisions 124 199 126 630
Liability for funeral benefits 3 226 3 226
Liability for post-retirement medical benefits 40 712 40 712
Funding: debt securities held at amortised cost 6 413 915 6 336 487
Funding: debt securities held at FVTPL 32 058 145 30 117 774
Funding: lines of credit 14 209 921 14 015 426
Derivative liabilities held for risk management 74 412 142 857
Total liabilities 54 013 265 51 621 703
Equity
Share capital 200 000 200 000
Retained earnings 18 857 189 17 514 577
Permanent government funding 11 692 344 11 692 344
Revaluation reserve on land and buildings 198 322 198 322
Hedging reserve 130 733 141 680
Reserve for general loan risks 2 399 227 2 287 491
Fair value reserve 857 (3 038)
Total equity 33 478 672 32 031 376
Total liabilities and equity 87 491 937 83 653 079
Condensed statement of changes in equity for the six months period ended 30 September
2017
Six months Six months
in thousands of rand ended ended
30 Sept 2017 30 Sept
Reviewed 2016
Reviewed
Balance at beginning of the year 32 031 376 29 265 059
National Treasury capital injection
Profit for period 1 454 348 1 040 858
Net unrealised (loss)/ gain on cash flow hedges (10 947) 69 746
Change in hedging reserve 3 895 (372)
Total equity at end of the period 33 478 672 30 375 291
Condensed statement of cash flow for the six months period ended 30 September 2017
Six months ended Six months
30 Sept 2017 ended
Reviewed 30 Sept
2016
Reviewed
Cash flows generated from operating activities 1 730 457 1 856 545
Cash flows used in development activities (2 045 309) (1 084 132)
Cash flows used in investing activities (285 557) (329 787)
Cash flows generated from/(used in)financing
activities 1 376 361 (705 321)
Effect of exchange rate movement on cash balances 4 906 (15 402)
Net decrease in cash and cash equivalents 780 858 (278 097)
Cash and cash equivalents at the beginning of the
year 2 299 247 2 084 565
Cash and cash equivalents at the end of the period 3 080 105 1 806 468
Debt Sponsor: Nedbank Corporate and Investment Bank, a division of Nedbank
Limited
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Date: 28/11/2017 09:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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