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The Development Bank of Southern Africa Limited: Audited results for the year ended 31 March 2018
Development Bank of Southern Africa Limited
Registration number: 1600157FN
JSE alpha code: DIDBS
The Development Bank of Southern Africa Limited: Audited results for the year
ended 31 March 2018
Overview
Development Bank of Southern Africa Limited (hereafter referred to as “Bank”)
is a development finance institution, whose only shareholder is the Government
of the Republic of South Africa. The summary of the audited annual financial
results is published on SENS to provide information to holders of the Bank’s
debt instruments.
Audit of the financial results
The Auditor General of South Africa has audited the financial results of the
Bank for the year ended 31 March 2018. In his audit report, which is available
for inspection at the Auditor General’s Registered Office, the Auditor General
of South Africa stated that his audit was conducted in accordance with
International Standards on Auditing, and has expressed an unqualified audit
opinion on the annual financial statements for the year ended 31 March 2018.
Context of the annual financial statements
The year under review was characterised by low business confidence, low growth,
country credit rating downgrades by S&P Global and Fitch, and delays in signing
of the independent power purchase agreements. Nevertheless, the Bank continued,
in line with its mandate, to pursue the implementation of its growth strategy
designed to augment disbursements by focusing on its catalytic role to enable
sustainable infrastructure development. Through this strategy, the Bank is
aiming at increasingly crowding in third party funding, de-risking projects
through early stage project development and improved innovation.
Preparation of the annual financial statements
The annual financial statements have been prepared under the supervision of
Chief Financial Officer, Boitumelo Mosako CA (SA). The directors take full
responsibility for the preparation and for correctly extracting the financial
information from the underlying audited annual 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 2017. The annual
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 and
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.
Key impressions of the financial results and activities
Net profit for the year is R2.28bn (31 March 2017:R2.82bn). Included in the
prior year financial results were realised gains amounting to R600m relating to
the exit of private equity investment. Adjusting for the significant realisation
from the exit strategy on the equity investments, the net profit remains
constant. Total assets increased by 6.6% largely due to an increase in net
development loans of R3.5bn to R75.1bn (31 March 2017: R71.5bn). The total
impairment provision for credit losses increased by 16% to R4.82bn (31 March
2017: R4.16bn). The loan book asset quality remains acceptable as demonstrated
by the non-performing loans ratio of 4.5% (31 March 2017: 3.3%), well within
the Bank’s threshold of 6%. Cash generated from operations increased from
R3.76bn to R4.04bn.
Key indicators of the Bank’s financial performance for the year ended 31
March 2018
- Profitability: R2.28bn (31 March 2017: R2.82bn.
- Sustainable earnings of R2.76bn (31 March 2017: R3.56bn). Sustainable
earnings is net profit adjusted for foreign exchange and revaluation of
financial instruments.
- Net interest income increased by 5%: R3.84bn (31 March 2017: R3.67bn)
- Impairment charge for the year amounting to R623m (31 March 2017: R339m)
- Operating income decreased by 5% to R3.84bn (31 March 2017: R4.06bn)
- Cost to income ratio: 22% (31 March 2017: 18%)
- Cash flow generated from operations: R4bn (31 March 2017: R3.8bn)
- Total assets increased by 6.6% to R89.2bn (March 2017 to R83.7bn)
- Development loans and equity disbursements was R12.2bn (31 March 2017:
R12.4bn)
- Return on equity 8.3% (March 2017: 9.2%)
- Debt-to-equity ratio excluding R20bn callable capital of 156.2% (31 March
2017 158.1%)
- Debt-to-equity ratio including R20bn callable capital of 98.7% (31 March
2017 97.4%). Callable capital is shares authorised, but not yet issued. The
debt to equity ratio remains well 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 in the year ending 31 March 2019 hinges on the Bank’s ability to
grow developmental impact against the context of an improved economic
environment that is aided by improved business confidence as well as a strong
global economic recovery. The Bank has recently completed the implementation of
a new operating model that promotes high levels of client-centricity and that
enables the development and delivery of innovative infrastructure solutions.
The Bank will continue to focus on disbursing to infrastructure projects to
grow developmental impact in line with its mandate.
Statement of Financial Position as at 31 March 2018
In thousands of rands
2018 2017
Assets
Cash and cash equivalents 3 741 853 2 299 247
Trade receivables and other assets 399 621 121 982
Investment securities 1 420 920 1 069 085
Derivative assets held for risk management 1 240 445 846 141
Post-retirement medical benefits investment 45 446 45 251
Equity investments 5 535 351 5 972 509
Development bonds 1 290 361 1 290 319
Development loans 75 047 479 71 505 178
Property and equipment 398 760 415 409
Intangible assets 91 710 87 958
Total assets 89 211 946 83 653 079
Liabilities
Trade payables and deferred income 1 204 264 838 591
Provisions 66 640 126 630
Liability for funeral benefits 2 152 3 226
Liability for post-retirement medical benefits 44 604 40 712
Debt securities held at fair value through
profit and loss 6 473 055 6 336 487
Debt securities held at amortised cost 33 363 703 30 117 774
Funding: lines of credit 13 677 213 14 015 426
Derivative liabilities held for risk management 59 240 142 857
Total liabilities 54 890 871 51 621 703
Equity
Share capital 200 000 200 000
Statement of Comprehensive Income for the year
ended 31 March 2018
in thousands of rands
2018 2017
Interest income 7 750 606 7 373 094
Interest expense (3 905 259) (3 703 760)
Net interest income 3 845 347 3 669 334
Net fee income 190 196 318 266
Net foreign exchange loss (302 057) (618 649)
Net loss from financial assets and liabilities (131 605) (43 354)
Other income 242 540 734 090
Other operating (loss)/income (926) 390 353
Operating income 3 844 421 4 059 687
Project preparation (7 094) (24 453)
Development expenditure (15 154) (27 181)
Net impairment loss on financial assets (623 178) (339 449)
Personnel expenses (702 880) (603 608)
General and administration expense (177 601) (202 180)
Depreciation and amortisation (25 871) (31 249)
Profit from operations 2 292 643 2 831 567
Grants (9 766) (10 718)
Profit for the year 2 282 877 2 820 849
Retained income 19 472 969 17 514 577
Permanent government funding 11 692 344 11 692 344
Revaluation reserve on land and buildings 183 809 198 322
Cash flow hedge reserve 151 883 141 680
Reserve for general loan risks 2 611 976 2 287 491
Available for sale reserve 8 094 (3 038)
Total equity 34 321 075 32 031 376
Total liabilities and equity 89 211 946 83 653 079
Statement of Other Comprehensive Income for the year ended 31 March 2018
in thousands rands
2018 2017
Profit for the year 2 282877 2 820 849
Items that will not be reclassified to profit and loss
Loss on revaluation of buildings (14 513) (70 934)
Items that may be reclassified subsequently to profit and loss
Unrealised gain on cash flow hedges 121 616 12 846
(Gain)/loss on cash flow hedges reclassified to statement (111 413) 5 784
of comprehensive income
Unrealised gain/(loss)of available-for-sale financial 11 132 (2 228)
assets
21 335 16 402
Other comprehensive gain/(loss) 6 822 (54 532)
Total comprehensive income for the year 2 289 699 2 766 317
Condensed statement of changes in equity for the year ended 31 March 2018
In thousands of rands
2018 2017
Balance at beginning of the year 32 031 376 29 265 059
Profit for the year 2 282 877 2 820 849
Unrealised gain on cash flow hedges 121 616 12 846
(Gain)/loss on cash flow hedges reclassified to
statement of comprehensive income (111 413) 5 784
Fair value adjustment of available for sale financial 11 132 (2 228)
assets
Loss on revaluation of land and buildings (14 513) (70 934)
Total equity at end of the year 34 321 075 32 031 376
Summarised Statement of Cash Flows for the year ended 31 March 2018
In thousands of rand
Cash flows generated from operating activities 4 039 466 3 766 622
Cash flows utilised in development activities (5 606 062) (2 831 455)
Cash flows utilised by investing activities (444 179) (857 505)
Cash flows generated from financing activities 3 543 653 155 973
Effect of exchange rate movement on cash balances (90 272) (18 953)
Net increase in cash and cash equivalents 1 442 606 214 682
Cash and cash equivalents at the beginning of the 2 299 247 2 084 565
year
Cash and cash equivalents at the end of the year 3 741 853 2 299 247
Further information will be available on www.dbsa.org
21 September 2018
Debt Sponsor: Nedbank CIB, a division of Nedbank Limited
6
Date: 21/09/2018 11:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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