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Reviewed results of the period ended 30 September 2018
Development Bank of Southern Africa Limited
Registration number: 1600157FN
JSE alpha code: DIDBS
Reviewed results for the period ended 30 September 2018
Overview
Development Bank of Southern Africa Limited (hereafter referred as “the Bank”)
is a development finance institution, whose only shareholder is the Government
of the Republic of South Africa. This summary of the condensed interim financial
results is published on SENS to provide information to the holders of the Bank’s
listed debt instruments. The condensed interim results are prepared in
accordance with the requirements of the JSE Limited (JSE) Listings Requirements,
the requirements of International Financial Reporting Standards (IFRS) and its
interpretations as adopted by the International Accounting Standards Board, the
presentation requirements of IAS 34:Interim Financial Reporting and
requirements of section 27 to 31 of the Companies Act of South Africa (Act No.71
of 2008) (The Companies Act) being the relevant and corresponding sections
specified in the Development Bank of Southern Africa Act. The detailed interim
results are available on the DBSA website (https://www.dbsa.org).
Independent review of results by Auditors
The condensed interim financial statements of the Bank for the six months ended
30 September 2018 have been reviewed by the Bank’s auditor, The Auditor-General
of South Africa (hereafter referred to as AG) and the AG has expressed an
unmodified review conclusion on the condensed interim financial statements. The
AG’s review conclusion, which is available for inspection at the Bank's
registered office, states that the review was conducted in accordance with
‘International Standard on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity’.
Context of the condensed interim financial statements
Statistics SA announced in September 2018 that South Africa is in a technical
recession following two consecutive quarters of GDP contraction, primarily
driven by declining output in agriculture, transport and trade. Further to this,
business confidence and economic growth continue to be weak. The Bank continues
to experience the adverse impact of the subdued economy, resulting in reduction
in disbursements to date as compared to the same period last year. The Bank
will continue to pursue the implementation of its growth strategy and catalyzing
third party funds for increased sustainable infrastructure development impact.
Preparation of the condensed interim financial statements
The condensed interim financial statements have been prepared under the
supervision of Boitumelo Mosako CA (SA), Chief Financial Officer.
The Board of 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.
Basis of preparation
Except for the adoption of IFRS 9 and IFRS 15, accounting policies and methods
of computation applied are consistent with those applied to the annual financial
statements as at 31 March 2018. The Bank adopted IFRS 9: Financial Instruments
on 1 April 2018. IFRS 9 replaces IAS 39 and introduces new requirements, which
includes an expected credit loss impairment model together with new requirements
for the classification and measurement of financial instruments. The Bank has
retrospectively adopted the IFRS 9 standard with an adjustment to its opening
retained earnings on 1 April 2018 and has elected not to restate its comparative
annual financial statements, as permitted under IFRS 9. The Bank adopted IFRS
15 on 1 April 2018 and, as permitted by the standard, did not restate its
comparative financial results. IFRS 15 does not affect the bulk of the Bank’s
revenue, as the standard does not apply to revenue associated with financial
instruments.
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 held at fair
value through profit and loss, land and buildings, post-retirement medical
benefits, 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 2018, net profit increased by 54% year-on-
year due to an increase in net interest income of 17%, a net gain on foreign
exchange of R628m (30 September 2017: loss of R110m) and a gain on financial
instruments of R290m (30 September 2017: loss of R40m). Sustainable earnings
increased by 14%, to R1.6bn (30 September 2017: R1.4bn). Sustainable earnings
is net profit adjusted for foreign exchange and revaluation of financial
instruments. The total assets decreased by 0.7% and was mostly driven by a
decrease in development loans to R73.6bn (31 March 2018: R75.0bn). The total
impairment provision for expected credit losses increased by 14.7% to R5.5bn
(31 March 2018: R4.8bn). Despite the additional impairment charge, the loan
book asset quality remains acceptable, as demonstrated by the non-performing
loans ratio of 5.2 %( 31 March 2018: 4.4%), which is within the threshold of
6%. The IFRS 9 opening retained earnings adjustment as disclosed in the
condensed statement of changes in equity mainly comprises of an adjustment to
the allowance for expected credit losses. The cost to income ratio for the
period is 22% as compared to 24% in 30 September 2017. The Bank generated cash
flow from operating activities of R1.9bn (30 September 2017: R1.7bn). Return on
equity (measured on sustainable earnings) remained unchanged at 9.2% March 2018:
8.3%).Debt-to-equity ratio excluding R20bn callable capital is at 140.8% (31
March 2018 156.2%). Debt-to-equity ratio including R20bn callable capital
amounts to 90.8% (31 March 2018 98.8%). Callable capital is shares authorised
but not issued. At 90.8% the debt to equity ratio remains well within the Bank’s
regulatory limit of 250%.
Condensed Statement of Comprehensive Income for the six months ended 30 September 2018
Six months Six months
in thousands of rand ended ended
30 Sept 2018 30 Sept 2017
Reviewed Reviewed
Net interest income 2 234 744 1 913 678
Other income 417 347 221 314
Net foreign exchange gain 628 247 110 487
Net operating income 3 280 338 2 245 479
Grants (8 129) (8 045)
Net impairment loss on financial assets (501 449) (272 210)
Personnel expenses (380 602) (376 290)
Other operating expenses (136 361) (122 485)
Depreciation and amortisation (9 908) (12 101)
Profit for the period 2 243 889 1 454 348
Condensed Statement of Other Comprehensive Income for
the six months ended 30 September 2018
Six months Six months
in thousands of rand ended ended
30 Sept 2018 30 Sept 2017
Reviewed Reviewed
Profit for the period 2 243 889 1 454 348
Other comprehensive loss (90 478) (7 052)
Total comprehensive income 2 153 411 1 447 296
Condensed Statement of Financial Position as at 30 September 2018
As at As at
in thousands of rand 30 Sept 31 March
2018 2018
Reviewed Audited
Assets
Cash and cash equivalents at amortised cost 4 330 078 3 741 853
Trade and other receivables at amortised cost 458 851 399 621
Investment securities held at FVTPL 1 354 923 1 420 920
Derivative assets held for risk management held
at FVPL 791 867 1 240 445
Post-retirement medical benefits investment 44 369 45 446
Equity investments held at FVTPL 6 266 188 5 535 351
Development bonds at amortised cost 1 290 731 1 290 361
Development loans at amortised cost 73 572 619 75 047 479
Property and equipment 395 777 398 760
Intangible assets 92 553 91 710
Total assets 88 597 956 89 211 946
Liabilities
Trade and other payables at amortised cost 1 116 681 1 204 264
Provisions 75 155 66 640
Employee benefits 46 756 46 756
Debt funding held at FVTPL 6 367 565 6 473 055
Debt funding held at amortised cost 44 386 898 47 040 916
Derivative liabilities held for risk management
held FVTPL 320 145 59 240
Total liabilities 52 313 200 54 890 871
Equity
Share capital 200 000 200 000
Retained earnings 21 966 304 19 472 969
Permanent government funding 11 692 344 11 692 344
Reserve for general loan risks 2 180 894 2 611 976
Other reserves 245 214 343 786
Total equity 36 284 756 34 321 075
Total liabilities and equity 88 597 956 89 211 946
Condensed statement of changes in equity for the six months period ended 30 September
2018
Six months Six months
in thousands of rand ended ended
30 Sept 2018 30 Sept 2017
Reviewed Reviewed
Balance at beginning of the year 34 321 075 32 031 376
IFRS 9 adjustments (189 730) -
Restated opening balance after IFRS 9 adjustments 34 131 345 31 031 376
Net profit for the period 2 243 889 1 454 348
Net unrealised loss on cash flow hedges (90 478) (10 947)
Unrealised gain on available-for-sale financial assets - 3 895
Total equity at end of the period 36 284 756 33 478 672
Condensed statement of cash flow for the six months period ended 30 September 2018
Six months ended Six months
30 Sept 2018 ended
Reviewed 30 Sept
2017
Reviewed
Cash flows generated from operating activities 1 910 240 1 730 457
Cash flows used in development activities 3 819 424 (2 045 309)
Cash flows used in investing activities (2 829) (285 557)
Cash flows (used in)/ generated from financing
activities (5 188 052) 1 376 361
Effect of exchange rate movement on cash balances 49 442 4 906
Net decrease in cash and cash equivalents 588 225 780 858
Cash and cash equivalents at the beginning of the
year 3 741 853 2 299 247
Cash and cash equivalents at the end of the period 4 330 078 3 080 105
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 2019 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 disbursement targets amid
current economic conditions. The Bank is however well positioned to weather the
volatility through the continued focus on structured infrastructure solutions,
project preparation, new infrastructure programmes, and partnerships.
30 November 2018
Debt sponsor: Nedbank CIB, a division of Nedbank Limited
5
Date: 03/12/2018 10:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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