BDC sees profits doubling
Isaac Pinielo | Friday September 23, 2016 16:18
The corporation’s draft results for the year ended June 2016 indicate a profit before tax of P200 million, almost two-fold from P110 million in the previous year.
According to documents presented to the parliamentary committee on statutory bodies recently, the projection includes P129 million of divestment income as well as ordinary and special dividends from wholly-owned subsidiaries. The results reflect a recovery for the government investment arm, which had experienced huge losses of P176 million in 2012, P222 million in 2013 and P76 million in 2014.
After incurring losses during 2012, due to a heavily impaired portfolio, the corporation launched a transformation programme under the leadership of its managing director, Bashi Gaetsaloe.
“The financial health of BDC has significantly improved, compared to the status as at 2013,” the corporation stated.
In addition, the BDC indicated that the negative working capital gap had significantly narrowed down from P400 million in 2013 to close 2015 at P145 million, and that the negative working capital has been eroded, leaving residual P200 million in working capital reflecting a healthy profitability ratio of 2.5 times.
Bank overdrafts have been reduced from an all-time high of P230 million to just under P60 million balances outstanding as at mid-August 2016.
“The distributable reserves have gradually corrected, narrowing from the negative P90 million as at 2013 down to negative P34 million by end of 2015 with 2016 draft accounts reflecting a significant improvement to a positive P180 million,” it stated.
It said the downward trend on the net worth of the business had been reversed by 2015 and improved to P1.7 billion by end of 2015, with a P2 billion reflected in 2016 draft accounts.
BDC also divested from underperforming and distressed assets as well as those investments not filling in with the current strategy, and the two major outcomes have been that the entities divested from have been placed in ownership of local enterprises, and a total of P340 million (before tax) has been raised from the divestments.
“It must be noted that the divestments were carried out for a number of reasons, and by far yielded desirable outcomes,” the corporation said.
It stated that the P340 million has since been applied towards prepayment of sub-optimal debt and invested in new projects.
The BDC has to date undergone two independent credit worthiness due diligences by prospective financiers, and these have both resounded confidence, but with caution given the short history of success.
In addition to addressing the ‘sub optimal’ financial state of the company, BDC said serious steps have been taken to significantly reduce the nonperforming loan (NPL) ratio, which hit an all-time high of over 60% by 2014, against an ideal level of six percent.
“Results have started showing, with the NPL ratio currently sitting at around 30%, and expected to reduce further down in the next two years, where the rate of default by new investments is expected to remain very low due to the rigour of the recently introduced investment and credit appraisal processes,” the company stated.