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DEVELOPMENT BANK OF SOUTHERN AFRICA - Audited results for the year ended 31 March 2014

Release Date: 15/09/2014 08:00
Wrap Text
Audited results for the year ended 31 March 2014

The Development Bank of Southern Africa

Audited results for the year ended 31 March 2014

Preparation of the financial statements

The following individual was responsible for the preparation of the financial
statements for the year ended 31 March 2014:

Kameshni Naidoo CA (SA), Chief Financial Officer

Basis of preparation

Accounting policies adopted and methods of computation are consistent with
those applied to the annual financial statements at 31 March 2013. The
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 financial statements are in conformity with IFRS.

The preparation of the financial statements require management to make
reasonable 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 results

The financial results of DBSA for the year ended 31 March 2014 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 audit was conducted in accordance with International
Standards on Auditing, and have expressed an unmodified audit report on the
year-end financial statements.

Key Highlights for the year

   -   Record disbursement of R12.7bn (31 March 2013: R9bn) main contributor
       to Development bonds and loan book net growth of 19% from 31 March
       2013.
   -   Significant turnaround in profitability for the year R787 million (31
       March 2013: Loss R825 million).
   -   Cost to income ratio 28.4% (31 March 2013: 48.9%).
   -   Net interest margin 45.6% (31 March 2013: 40%).
   -   Cash flow from operations R1.9bn (31 March 2013: R794 million).
   -   Capital injection received from National Treasury of R2.4bn in support
       of the new growth strategy.




                                                                                
Overview of the Financial results and activities

The Bank continues to implement its new business strategy and the key
financial indicators for the year under review are:

  -   Operating income increased by 23 percent to R2.3 billion (2012/13: R1.9
      billion) on the back of an increase in net interest income (2013/14:
      R2.1 billion, 2012/13: R1.6 billion) despite an increase in losses on
      financial assets and liabilities (2013/14: R629 million; 2012/13: R403
      million).

  -   Cost-to-income ratio improved significantly to 28.4 percent (2012/13:
      48.9 percent.The DBSA has seen a favourable decrease in its cost-to-
      income ratio due to the combination of a decrease in operating expenses
      and decrease in Development Fund expenses and an increase in net fee
      income, other income and net interest income.

  -   DBSA returned to profitability with net income of R787 million compared
      to a loss of R826 million in 2012/13.The DBSA recorded a profit for the
      year largely, in addition to the above figures, attributable to a
      decrease in net impairment losses on financial assets (2013/14: R735
      million, 2012/13: R1.6 billion).

  -   Development loans, bonds and equity investments disbursements of R12.7
      billion, an increase of 39.1% compared to the R9.2 billion disbursed
      during 2012/13.

  -   Provision for loan impairment increased by: 2 percent R2.4 billion
      (2012/13: R2.3 billion) although the provision for loan impairment
      increased, the quality of the loan book remains within acceptable
      parameters with non-performing loans at 5.8 percent of the total loan
      book (2013: 7.3 percent).

  -   Debt-to-equity ratio improved marginally to 216.3 percent (2012/13:
      217.4 percent).


  -   The National Treasury in support of the new strategy and growth
      prospects provided a capital injection of R2.4bn during the period
      under review, being the first tranche of the R7.9bn capital injection
      commitment.

  -   The organisational restructuring of the DBSA was completed during the
      year. The restructuring exercise was a challenging but necessary step
      in ensuring the Bank’s future financial sustainability and desired
      return on development impact. Appropriate measures to improve the long-
      term financial sustainability of the Bank are currently in
      implementation.




                                                                                
Statement of Financial Position as at 31 March 2014



in thousands of rand                                       2014               2013
Assets
Cash and cash equivalents                                  4 135   667        1 252 142
Other receivables                                            145   296          148 386
Investment securities                                      2 161   341        3 435 922
Derivative assets held for risk management                 1 308   325        1 422 719
Post-retirement medical benefits investment                   63   209           64 848
Home ownership scheme loans                                    7   544            8 932
Equity investments                                         4 610   448        4 455 721
Development bonds                                            772   743                -
Development loans                                         50 076   235       42 619 769
Property and equipment                                       461   873          470 298
Intangible assets                                             82   860           86 499

Total assets                                              63 825 541         53 965 236

Liabilities
Other payables                                               813 665            796 594
Provisions                                                    55 998            151 009
Liability for funeral benefits                                 3 100              4 300
Liability for post-retirement medical benefits               165 051             48 421
Funding: debt securities                                  29 216 814         25 790 079
Funding: lines of credit                                  13 606 441         10 081 507
Funding under repurchase agreements                                -            201 752
Derivative liabilities held for risk management               63 899             85 849

Total liabilities                                         43 924 968         37 259 511

Equity
Share capital                                                200 000            200 000
Retained earnings                                         11 296 416         11 031 631
Permanent government funding                               6 192 344          3 792 344
Revaluation reserve on land and buildings                    253 487            253 487
Hedging reserve                                               61 958             40 617
Reserve for general loan risks                             1 893 983          1 371 726
Fair value reserve                                             2 385             15 920

Total equity                                              19 900 573         16 705 725

Total liabilities and equity                                  63 825 541     53 965 236




                                                                      
Statement of Comprehensive Income for the year ended 31 March 2014

in thousands of rand                                            2014             2013


Interest income                                                4 576 209     4 068 007
Interest expense                                             (2 487 759)   (2 441 908)
Net interest income                                            2 088 450     1 626 099
Net fee income                                                   334 630       188 010
Net foreign exchange gain                                        279 945       346 978
Net loss from financial assets and financial liabilities       (629 496)     (403 157)
Other operating income                                           244 074       124 092
Other income                                                     229 153       255 923

Operating income                                               2 317 603     1 882 022
Project preparation                                             (20 867)      (13 444)
Net impairment loss on financial assets                        (734 871)   (1 605 632)
Personnel expenses                                             (561 597)     (654 307)
Other expenses                                                 (177 597)     (274 011)
Depreciation and amortisation                                   (18 627)      (19 378)

Income/(loss) from operations                                    804 044     (684 750)
Grant to DBSA Development Fund                                         -     (119 665)
Grants                                                          (17 001)      (21 499)


Income/(loss) for the year                                       787 042     (825 914)




                                                                             
Statement of Other Comprehensive Income for the year ended 31 March 2014

in thousands of rand                                                2014         2013

Income/(loss) for the year                                       787,042     (825,914)

Loss on revaluation of land and buildings                              -       (1,601)
Net unrealised gain on cash flow hedges                          109,108       59,866
Net losses on cash flow hedges reclassified to statement of
comprehensive income                                            (87,767)      (56,970)
Change in value of available-for-sale financial assets          (13,535)        2,772

Other comprehensive income                                         7,806        4,067

Total comprehensive income/(loss) for the year                   794,848     (821,847)




                                                                            
Summarised Statement of Cash Flows for the year ended 31 March 2014

in thousands of rand                                              2014           2013

Net cash generated from operating activities                   1 955 167       794 049

Net cash used in development activities                       (7 820 810)   (2 071 609)

Net cash generated from investing activities                     319 679        38 087

Net cash generated from financing activities                   8 475 037       375 427

Net increase/(decrease) in cash and cash equivalents           2 929 073      (864 046)
Effect of exchange rate movements on cash balances              (45 548)         3 034
Movement in cash and cash equivalents                          2 883 525      (861 012)
Cash and cash equivalents at the beginning of the year         1 252 142      2 113 154

Cash and cash equivalents at the end of the period             4 135 667      1 252 142




The 2013/2014 Integrated Annual Report is available on the DBSA website
www.dbsa.org


Issued by the Development Bank Of Southern Africa

Dated: 15 September 2014

SBSA (Debt Sponsor) Zoya Sisulu (011) 721 6032




                                                                            

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