BBS LIMITED
Summarised Unaudited Preliminary Financial Statements for the year ended 31 December 2019
CHAIRPERSON’S REPORT
I would like to start off with encouraging news which is that the audit for the year ended 31 December 2019 is substantially concluded. This means that the BBS Limited audit cycle will soon be normalised. Preparations to audit financial statements for 2020 will then commence.
Returning to the 2019 audit, I am sure you will join me, other colleagues on the Board and Management, in applauding progress made given the challenges BBS Limited encountered. These have been well documented in previous Annual Reports. They need no repeating here save to reassure you that the information technology system challenges we experienced will not arise in the future.
Overview of performance
• BBS Limited’s performance during the year under review
was as follows:
• Total balance sheet increased by 15% from P4.031 billion recorded as at December 2018 to P4.626 billion as at end of December 2019.
• Mortgage loans and advances rose from P3.197 billion to
P3.401 billion, representing an increase of 6%.
• Total savings and deposits grew by 33% from a balance of P2.170 billion as at 31 December 2018 to P2.885 billion as at 31 December 2019.
• The Company recorded a loss of P35.759 million for the 12-month period to December 2019 compared to a loss of P26.191 million which was recorded for the 9-month period between April 2018 and December 2018.
• BBS Limited continues to maintain a strong capital base; as at 31 December 2019 the capital adequacy ratio stood at 24.50%.
• The cost-to-income ratio for the period was recorded at
116%.
This is very high relative to financial industry norms. However, it didn’t come as a surprise to us as we knew that during the transition period, we would experience an increase in costs as we prepare our environment for operating under a new model as a commercial bank.
The observed loss was primarily due to the change in the capital structure as some amounts which used to be classified as “equity” are regarded as liabilities and have started earning interest as opposed to getting a distribution from profits. Furthermore, implementation of IFRS 9, an accounting standard, requires BBS Limited to make loss provisions for accounts even before they default. The impairment method, that is, expected credit loss as opposed to incurred credit losses, that has been adopted is now forward looking. During the year, BBS Limited experienced an increase in non-performing loans as some of our customers defaulted on their loan repayments due to loss of income and/or loss of jobs largely associated with mine closures and retrenchment by some companies. Thus, the non-performing loans ratio increased from 9% to 10% as at the end of December 2019.
Banking licence application
Following the conclusion of the 2019 audit, BBS Limited will re-submit its application for a commercial banking licence in December 2020. The application record has been updated accordingly and all things being equal, we expect to have received a response from the authorities by the middle of 2021. In the meantime, we are readying ourselves to operate commercially by putting in place all the necessary operational and human capital requirements.
Trading in BBSL Shares
The success we have had with the 2019 audit means that BBS Limited Shareholders can now resume trading in their shares following the lifting of the suspension by Botswana Stock Exchange Limited. Once again, we regret the inconvenience caused to Shareholders by the non-tradability of their shares during the period of audit gaps remediation.
At the 2018 Annual General Meeting held on 23rd July 2020, we welcomed a new Board Member, Mr. Geoffrey Bakwena, who is very experienced in matters of finance and we are confident that he will add value to the BBS Limited Board.
Conclusion
I would like to thank Shareholders and other parties interested in the well-being of BBS Limited for their continued support of our efforts to transform the business despite the challenges we have encountered. With the challenges behind us now, we are on course to attain our goal of commercialising BBS Limited.