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DBSA Audited Annual Results for the year ended 31 March 2017
Development Bank of Southern Africa Limited
Registration number: 1600157FN
JSE Company Code: BIDBS
19 September 2017
Audited results for the year ended 31 March 2017
Overview
Development Bank of Southern Africa is a state owned entity, whose only
shareholder is the Government of the Republic of South Africa. The summary of
Annual Financial results is published on SENS to provide information to holders
of DBSA debt instruments. The full set of financial statements is available on
the DBSA website at: www.dbsa.org
Preparation of the financial statements
The Annual Financial Results have been prepared under the supervision of Ms
Zodwa Mbele CA (SA), the Acting Chief Financial Officer.
The directors take full responsibility for the preparation of the summary of
annual financial results and for correctly extracting the financial information
from the underlying audited financial statements for inclusion in the SENS
announcement.
Basis of preparation
Accounting policies adopted and methods of computation are consistent with those
applied to the Annual Financial Statements at 31 March 2016. The Financial
Statements are prepared on the historical cost basis except for the following
assets and liabilities which 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 measured at actuarial values. The Annual Financial Statements
have been prepared in accordance with the recognition, measurement and
disclosure requirements of International Financial Reporting Standards
(“IFRS”), Public Finance Management Act of South Africa (“PFMA”), Section 27 to
31 of the Companies Act of South Africa and the Development Bank of Southern
Africa Act, 1997.
The Preparation of Annual Financial Statements 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.
Audit of the financial results
The Financial Results of DBSA for the year ended 31 March 2017 have been audited
by the Bank’s auditor, Nkonki Inc. In their audit report, which is available
for inspection at the Company's Registered Office, Nkonki Inc. stated that their
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audit was conducted in accordance with International Standards on Auditing, and
have expressed an unmodified audit report on the year-end financial statements.
Salient features of the Bank’s solid financial performance
Increase in profitability for the year: R2.8bn (2016: R2.6bn).
Increase in net interest income: R3.7bn (2016: R3.2bn).
Improvement in cost to income ratio: 18.8% (2016: 27.6%).
Cash flow generated from operations: R3.7bn (2016: R3.0bn).
Sustainable earnings of R3.6bn (2016: 1.3bn) a 157% increase. Sustainable
earnings is net profit adjusted for foreign exchange and revaluation of
financial instruments.
Further key impressions of the financial results and activities
The Bank continued to focus on its developmental mandate role, whilst
maintaining financial sustainability as follows:
Development loans and equity investments disbursements of R12.4bn, a decrease
of 27% compared to the R17.1bn disbursed during 2015/16.
Impairment charge for the year amounting to R339m (2016: R1.4bn). Thus the
provision for loan impairment increased by 10% to R4.2bn (2016: R3.8bn). Despite
additional impairment charge, the quality of the loan book remains within
acceptable parameters, demonstrated by non-performing loans at 3.3% of the total
loan book (2016: 3.7%).
Operating income decreased by 20% to R4.0bn (2016: R5.0bn) due to a loss in
foreign exchange of R619m (2016: R1.0bn gain) and a loss on financial
instruments of R44m (2016: gain of R442m). Included in other income is R664m
relating to a realised gain on equity investment.
Debt-to-equity ratio of 97.4% including callable capital of R20bn (2016: 152.4%
including callable capital of R4.8bn) is within the regulatory limit of 250%.
Return on equity remained stable at 9.2% (2016: 9.7%).
Events after the reporting period
The DBSA credit rating was downgraded following the sovereign credit down grade.
The short term risk associated with the downgrade to the DBSA relates to the
dollar book and at this point is largely restricted to a non-material
incremental cost to the organization.
Outlook & Economic conditions
The less buoyant economic condition led to the DBSA not achieving its
disbursement target. The conditions are likely to persist, thereby putting
pressure on the DBSA business. The Bank is however well positioned to weather
the volatility through its renewed focus on structured infrastructure solutions,
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project preparation, new infrastructure programmes, partnerships and
maintenance of public infrastructure.
Statement of Financial Position as at 31 March 2017
2017 2016
in thousands of rand
Assets
Cash and cash equivalents 2 299 247 2 084 565
Trade and other receivables 121 982 138 533
Investment securities 1 069 085 1 265 218
Derivative assets held for risk management 846 141 1 163 533
Post-retirement medical benefits investment 45 251 49 978
Equity investments 5 972 509 6 278 575
Development bonds 1 290 319 1 290 296
Development loans 71 505 178 69 494 954
Property and equipment 415 409 501 202
Intangible assets 87 958 79 142
Total assets 83 653 079 82 345 996
Liabilities
Other payables 838 591 894 795
Provisions 126 630 152 533
Liability for funeral benefits 3 226 3 100
Liability for post-retirement medical benefits 40 712 239 289
Debt securities 36 454 261 35 271 135
Funding: lines of credit 14 015 426 16 371 534
Derivative liabilities held for risk management 142 857 148 551
Total liabilities 51 621 703 53 080 937
Equity
Share capital 200 000 200 000
Retained earnings 17 514 577 14 544 861
Permanent government funding 11 692 344 11 692 344
Revaluation reserve on land and buildings 198 322 269 256
Cash flow hedge reserve 141 680 123 050
Reserve for general loan risks 2 287 491 2 436 358
Available for sale reserve ( 3 038) (810)
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Statement of Comprehensive Income for the year ended 31
March 2017
in thousands of rand 2017 2016
Interest income 7 373 094 6 541 028
Interest expense (3 703 760) (3 355 429)
Net interest income 3 669 334 3 185 599
Net fee income 318 266 275 914
Net foreign exchange (loss) /gain (618 649) 1 002 172
Net (loss)/gain from financial assets and liabilities (43 354) 442 630
Other operating income 734 090 134 355
Other income 390 353 1 855 071
Operating income 4 059 687 5 040 670
Project preparation (24 453) (14 651)
Development expenditure (27 181) (43 869)
Net impairment loss on financial assets (339 449) (1 426 159)
Personnel expenses (603 608) (730 937)
Other expenses (202 180) (213 653)
Depreciation and amortisation (31 249) (30 593)
Profit from operations 2 831 567 2 580 808
Grants (10 718) (4 129)
Profit for the year 2 820 849 2 576 679
Total equity 32 031 376 29 265 059
Total liabilities and equity 83 653 079 82 345 996
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Statement of Other Comprehensive Income for the year ended 31 March 2017 in thousands
of rand
2017 2016
Profit for the year 2 820 849 2 576 679
Items that will not be reclassified to profit and loss
Gain on revaluation of land and buildings (70 934) -
Items that may be reclassified subsequently to profit and loss
Unrealised gain on cash flow hedges 12 846 142 063
Gain/(loss) on cash flow hedges reclassified to statement
of comprehensive income 5 784 (135 301)
Fair value adjustment of available-for-sale financial assets (2 228) (1 067)
16 402 5 695
Other comprehensive (loss)/income (54 532) 5 695
Total comprehensive income for the year 2 766 317 2 582 374
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Condensed statement of changes in equity
2017 2016
in thousands of rand
Balance at beginning of the year 29 265 059 23 682 685
Government recapitalisation - 3 000 000
Profit for the year 2 820 849 2 576 679
Unrealised gain on cash flow hedges 12 846 142 063
Gain/(loss)on cash flow hedges reclassified to statement of
comprehensive income 5 784 (135 301)
Fair value adjustment of available for sale financial assets (2 228) (1 067)
Loss on revaluation of land and buildings (70 934) -
Total equity at end of the year 32 031 376 29 265 059
Summarised Statement of Cash Flows for the year ended 31 March 2017
Cash flows generated from operating activities 3 766 622 3 025 315
Cash flows used in development activities (2 831 455) (11 199 428)
Cash flows (utilised)in /generated from investing
(857 505) 167 432
activities
Cash flows generated from financing activities 155 973 6 085 967
Effect of exchange rate movement on cash balances (18 953) 103 616
Net increase/(decrease) in cash and cash equivalents 214 682 (1 817 098)
Cash and cash equivalents at the beginning of the
2 084 565 3 901 663
year
Cash and cash equivalents at the end of the year 2 299 247 2 084 565
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Debt Sponsor: Nedbank Corporate and Investment Bank, a division of Nedbank
Limited
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Date: 19/09/2017 10:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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