BDC Investor Presentation - Botswana Development Corporation

Botswana Development Corporation
Presentation to Investor Community
Gaborone
January 2016
Executive Summary
BDC is a development finance Institution founded in 1970 with the Government of Botswana as the sole
shareholder. It was formed to promote and facilitate the development of industrial, commercial, and
agricultural enterprises within the framework of the Government’s plan for economic development
As the country’s main agency for development, BDC remains one of the biggest investors in Botswana with investment
assets worth over BWP 2 billion, from a humble ZAR 20,000 worth of investment assets held as at the commencement
of operations in 1971
After four decades of uninterrupted operations several factors combined to inform a decisive Transformation Road Map
that the Corporation adopted in 2013. These factors include the need to re-focus on core mandate, the need to re-align
the business model to current business climate, the need to build an operational model and structure more responsive
to investor needs, and the need for more optimal capital and funding structure
BDC's business is supported by a strong balance sheet with a well diversified portfolio of investments which has proven
resilient during tough economic conditions
BDC’s Strategic Plan centres on a single, unifying Strategic Goal of “doubling the business in 5 years”. The new
investment strategy, directly aligned to the Company’s medium term strategic plan and it’s mandate has turned BDC into
a more efficient entity with refreshed governance, operational and risk management practices and structures, thus
making it ready to earnestly implement its 2014-2018 business strategy
BDC is therefore meeting investors to broaden its credit audience and further enhance its market access
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Agenda
1. Presentation Team
2. BDC’s Strong and Growing Franchise
3. Funding Requirements
4. Questions
5. Appendix
3
Introduction to BDC’s Strong Leadership Team
BDC has reinforced its executive team which now includes experienced venture capital, risk management
and finance skills with both regional and international experience
Managing
Director
Mr Bashi Gaetsaloe BA (Economics), MA, (Economics)
• Mr. Gaetsaloe assumed the top position at BDC in March 2014
• Prior to that, he was Country Managing Director at Accenture Botswana
• Bashi has specific experience working across various sectors covering business strategy, organizational
transformation, business start-ups and business turnaround, change management, and financial management
Chief Risk Officer
Mr Mbako Mbo IBAcc, BSc (Hons), MBA, FCCA, CPA (Botswana), AMCT
• Mr. Mbo officially joined BDC in May 2015 from African Development Bank where he held the position of Financial
Management Expert
• Mbako has previous experience from Deloitte, Barclays, Botswana Telecommunications, Botswana Power Corporation
where he held various roles including: financial accounting, management accounting, financial planning, and auditing
Chief Operations
Officer
Mr Bafana Molomo Bcomm (Economics and Finance), MBA, Post Grad Diploma (Business)
• Mr. Molomo officially joined BDC in June 2015
• He began his career as an investment analyst with Fleming Asset Management Botswana followed by Vantage Capital
• He brings extensive experience in: Private equity, corporate finance, venture capital, mezzanine finance, structured
finance, project finance, deal origination, market research and strategy
Chief Financial
Officer (Ag)
Ms Maranyane Makhondo BAcc, ACCA
• Ms. Makhondo is currently the acting Chief Financial officer of the Corporation
• Prior to joining the Corporation Ms. Makhondo had accumulated a wealth of experience in both the private and quasipublic institutions in manufacturing and property industries where her roles included financial accounting, credit
control, capital accounting and overall financial management
4
Introduction to BDC’s Strong Leadership Team (cont’d)
BDC has reinforced its executive team which now includes experienced venture capital, risk management
and finance skills with both regional and international experience”
Chief Audit
Executive
Head of
Marketing
Communications
Head of Human
Capital
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Ms Marina Khan Bcomm , MSc (Strategic Management)
• Ms. Khan joined BDC in assumed the top position at BDC in August 2015
• Prior to that, she was Country Head of Audit at Standard Chartered Bank of Botswana
• She also previously held senior internal audit roles at Barclays Bank of Botswana and Botswana Power Corporation
Ms. Boitshwarelo Lebang BSc (Computer Science), MSc (Strategic Management)
• Ms. Lebang joined BDC in March 2008 as a Principal Public Affairs Officer before she rose through the ranks to
become the Manager, Corporate Communications and Public relations before being elevated to the Corporation’s
Head of Marketing Communications
• Prior to joining BDC she worked as a media practitioner in both television and radio and also did extensive work as a
media consultant
M. Thabile Moilpolai BSc (Business Administration)
• Ms. Moipolai officially joined BDC in July 2015
• She was previously with De Beers Global Sight holder Sales where she held the position of Human Resources Business
Partner
• She brings extensive experience in the areas of HR service delivery, talent & performance management, capacity
building among others
Agenda
1. Presentation Team
2. BDC’s Strong and Growing Franchise
3. Funding Requirements
4. Questions
5. Appendix
6
BDC is Integral to the Development of Botswana’s Economy
Botswana Development Corporation is an investment arm of Government
Our Mandate
• To provide, facilitate and support financing of
commercially viable developments in order
to contribute to a sustainable and diversified
Botswana economy
• To develop new and existing industrial,
commercial, property and agricultural
businesses and property development
• To stimulate the growth of the private sector,
diversify the economy and create wealth for
the shareholder
• To invest in the region and internationally
• To conduct its business on a commercial
basis and exercise special care and regard to
economic and commercial merits
7
BDC Quick Facts
• Structure: A company limited by shares
• Ownership: 100% Government of Botswana
• Governance: Independent Board
• Products: - Debt and equity financing
- Mezzanine financing
- Structured financing
• Company Assets (2015): BWP 2.5 billion
Company Revenue (2015): BWP 311 million
• Industries: Energy, Mining, Services, Industry,
Property, Technology, Infrastructure
Source: BDC Annual reports, Audited Financial Statements
Introduction to BDC
As the country’s main agency for development and one of the biggest investors in Botswana, BDC is
ready to lead the way in the industrialisation of Botswana through the creation and growth of viable,
sustainable, and innovative local and regional businesses
History of
Success
Strong
Government
Support
History
• Since 1970, our mandate
has been to provide,
facilitate and support
financing of commercially
viable developments in
order to contribute to a
sustainable and diversified
Botswana economy
Strong
Balance Sheet
• Debt and
instituted a major review of the
business under a Re-Modelling
Programme in order to address
major challenges facing the
business
8
Resilient
Business
Strategic Plan
2014 - 2018
Key Performance Indicators
Business Lines
Company
2012
2013
2014
2015
Total Assets (BWP millions)
2,071
2,178
2,265
2,488
Total Revenues (BWP millions)
172
152
211
311
Profit Before Tax (BWP millions)
-176
-222
-67
110
Net Interest Margin (%)
27
9
8
9
Cost to Income Ratio (%)
70
84
72
42
Strategic Goal
Total Equity to Total Assets (%)
69
64
62
67
• Double the business
ROE (%)
-13
-17
-5
6
ROA (%)
-8
-10
-3
4
Tier 1 Capital Ratio (%)
41
45
43
40
Capital Adequacy Ratio (%)
45
42
43
41
•
•
equity
financing
Mezzanine
financing
Structured
financing
Transformation Journey
• In late 2013 the Board
Diversified
Portfolio
in 5 years
Source: BDC Annual reports, Audited Financial Statements
BDC Transformation Journey
During the past few years, a combination of factors has dampened our performance...
•
Changed business landscape
Company
2011
2012
2013
2014
2015
•
Increased risks
400
104
102
150
194
•
Operating Revenue
(BWP millions)
Skill gaps
Profit Before Tax
(BWP millions)
46
-176
-222
-67
110
•
Redundant structures
... However, in late 2013 the Board instituted a major review of the business under a Re-Modelling
Programme in order to address major challenges facing the business
 Changing development priorities
 Changing business landscape
 Changing client needs
 Changing shareholder expectations
9
Source: BDC Annual reports, Audited Financial Statements
A Three-Phased Approach
The focus has been to build a viable and sustainable BDC that will successfully operate within the new
business reality
1
2
3
Prepare The Business
Re-align the Business
Build Capacity:
Decisive actions:
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•
Restructure the Business
•
Restructure governance
•
New policies
•
New systems
•
New processes
Grow The Business
•
Create a platform for
sustainable and viable
growth
•
Introduce new skills
•
Build teams
Execute at speed:
•
Double the investments
assets in 5 years
•
A comprehensive deal
pipeline
•
Optimize current
portfolio structure
•
Forge strategic alliances
BDC’s Strategic Plan 2014 – 2018
BDC’s Strategic Plan centres on a single, unifying Strategic Goal of “doubling the business in 5 years”. The
new investment strategy, directly aligned to the Company’s medium term strategic plan and it’s mandate
has since been developed and it aims to:




Support emerging industries
Sustain critical industries
Drive rural industries
Promote regional cooperation through strategic investment partnerships with regional peers
Going forward BDC
will focus on
commercially viable
businesses over
BWP 30 million
1.
2.
3.
4.
5.
6.
Pioneer new industries
Unlock value in existing industries
Stimulate private sector growth and linkages
Drive diversification and exports
Create significant employment
Generate wealth from outside the country
#NewBDC will leverage partnerships to execute its mandate
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What Has Been Achieved to Date
Implementation of the Re-Modelling Programme began in April 2014 and the #NewBDC is now “live” in
the new environment. The initiative turned BDC into a more efficient entity with refreshed governance,
operational and risk management practices and structures, thus making it ready to earnestly implement
its 2014-2018 business strategy
Transformation Achievements
Transformation Results
(FY15)
•
Strong governance
•
New teams
•
Improved organizational structure
 Total Revenue: ↑ 47%
•
Best practice risk management & governance
policies and frameworks
 Expenses: ↓ 28%
•
Improved portfolio quality
 Provisions: ↓ 48%
•
Strengthened business development
capabilities
 Profit Before Tax: ↑ 264%
•
A new culture of #FAST
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 Operating Revenue: ↑ 29%
Source: BDC Audited Financial Statements
A History of Successful Investments and Positive Impact on the
Economy
BDC’s contribution has permeated every major industry in Botswana and the Corporation has been
responsible for some of most important companies in Botswana
Pioneering New Industries
Facilitating Sustainable
Employment
Industrialisation
BDC's Profit Before Tax and Revenue: 2001 - 2011
BWP millions
500
• Debt and Equity Financing
• Mezzanine Financing
• Structured Financing
400
300
200
100
0
-100
-200
2001
2002
2003
2004
2005
2006
Revenue (Million Pula)
13
Source: BDC Annual reports, Audited Financial Statements
2007
2008
2009
2010
Profit Before Tax
PBT(Pulas)
2011
Supported by a Strong Balance Sheet
Assets: BWP 2.5 billion
Capital Structure
Investment in Subsidiaries
Other Investments assets
PPE
BWP billions
2,5
2,0
1,5
1,0
Inter company balances
0,5
0,0
Assets
Total investment assets
Shareholder funds
BWP billions
BWP billions
4,5
Company
3,5
Group
4,0
Group
Shareholder's Equity
Group net Shareholder funds
3,0
3,5
2,5
3,0
2,5
2,0
2,0
1,5
1,5
1,0
1,0
0,5
0,5
0,0
0,0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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Company
Liabilities
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: BDC Annual reports, Audited Financial Statements
Resilient Business During Tough Economic Conditions
BDC’s business has proven resilient even during tough economic times and poor financial performance
Assets and GDP Growth
BWP billions
4,5
Company
Group
10%
GDP Growth
4,0
8%
3,5
6%
3,0
2,5
4%
2,0
2%
1,5
0%
1,0
-2%
0,5
0,0
-4%
2002
15
2003
2004
2005
2006
2007
2008
2009
2010
Source: BDC Annual reports, World Bank Data
2011
2012
2013
2014
2015
Agenda
1. Presentation Team
2. BDC’s Strong and Growing Franchise
3. Funding Requirements
4. Questions
5. Appendix
16
Funding Strategy
As part of BDC’s Strategic 2014 – 2018 Plan, the Corporation aims to optimise its funding structure by
introducing more longer term debt to be acquired both locally and internationally during the short to
medium term
The Present Capital Structure
BWP billions
3,0
0.2
2,0
0.4
1,0
1.6
BWP billions
Short term borrowing
Long Term borrowing
Shareholder Funds
0,0
Assets
Liabilities
Shareholder's Equity
Current Funding Mix
Targeted Funding Mix: Short to Medium Term
Internal Sources
Long Term Sources
Internal Sources
Internal Sources
Cash Flows
Long term borrowings
Long term borrowings
2%
15%
Cash Flows – including divestment
proceeds from selling non strategic
investments
55%
5%
(This includes resources to be channelled
to co-financed investment undertakings)
Short Term Revolving Credit Lines
Shareholder Financing
Short Term Revolving Credit Lines
Shareholder Financing
Short term credit lines (local
commercial banks)
Creditors
Ordinary share
Capital Retained
Earnings Reserve
Short term credit lines (local
commercial banks)
Creditors
Ordinary share
Capital Retained
Earnings Reserve
16%
72%
3%
37%
17
Source: BDC Annual reports, Audited Financial Statements, BDC Internal Reports
Solid Pipeline of Projects
Our pipeline includes 16 major projects valued at over BWP 10 billion. These are linked to our strategy
and to Botswana’s development agenda
Sector
Number of projects
Investment requirement
(BWP million)
Agri-processing
4
415
Energy & emerging industries
6
1,487
Infrastructure
3
7,825
Property
2
700
Services
1
30
Total
16
10,457
Total employment creation: Between 3500 and 6000 direct and indirect jobs over
the medium term
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Source: BDC Internal Reports
Capital Funding Requirements
BDC has determined its total capital funding requirement to be BWP 3 billion in the short to medium
term. There is a clear demonstration of the ability of the projects to be financed to generate the required
returns and repay the financial resources expended to them
Up to 2017
Funding new investments
BWP 700 million
Refinancing
BWP 230 million
Seed capital buffer
BWP 70 million
Total required
BWP 1 billion
7%
Funding Pipeline Projects
23%
Restructuring of Short Term Debt
70%
Capital Buffer
2017 and Beyond
Funding new investments: 2017 - 2019
BWP 2 billion
Funding new investments: beyond 2019
BWP 5.5 billion
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Source: BDC Internal Reports
Agenda
1. Presentation Team
2. BDC’s Strong and Growing Franchise
3. Funding Requirements
4. Questions
5. Appendix
20
Agenda
1. Presentation Team
2. BDC’s Strong and Growing Franchise
3. Funding Requirements
4. Questions
5. Appendix
21
Key Ratios
Select Key Indicators
2013
2014
2015
Dividends
49%
55%
51%
Interest
18%
17%
12%
Other
33%
28%
37%
Current Ratio
0.31
0.26
0.65
Leverage Ratio
1.51
1.44
1.27
Gearing
24%
26%
17%
Liquidity Coverage Ratio
20%
71%
75%
Composition of
income
22
Source: BDC Annual reports, Audited Financial Statements, BDC Internal Reports
Our Journey Over the Next Four Years
A steady growth in profitability, driven by growing revenues and expenditure management
Financial Performance and Projections
BWP millions
400
300
200
100
0
-100
-200
-300
2013
2014
2015
Total Revenue
23
2016 (b)
Total Expenditure
Source: BDC Annual reports, BDC Internal Reports
2017 (f)
PBT
2018 (f)
2019 (f)
Corporate Social Responsibility Programme and Initiatives
The Corporation’s Corporate Social Responsibility Programme is deliberately made diverse to
meaningfully benefit a significant number of individuals in communities within which we operate. Over
the past 5 years, education, arts and environmental preservation have immensely benefited from the
Corporation’s Corporate Social Investment (CSI) initiatives
BDC CSR POLICY VALUE STATEMENT
“To be the leading development and investment financier that makes a significant contribution to the sustainable
development of the communities in which we operate.”
BDC CSR PURPOSE VALUE
The purpose of BDC CSR programme is to build passion and pride for the BDC brand through the use of our human
and financial resources to address the needs of the communities in which we operate and invest.
For the current year, the Corporation is in the process of implementing a Corporate Social Investment Project that is
aligned to its mandate:
• The targeted project will address entrepreneurship/business skills development especially among youth
• This is where the bulk of the CSR budget will go and the rest will be utilised in donations and sponsorships
• The programme is aimed at benefiting a considerable number of youth who will benefit from it at intervals over a
period of 3-5 years
• Donations and sponsorships will continue to benefit a wide array of members of our communities
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