CDC posts £420m return in 2014

The UK development finance institution made 19 new investments last year totalling £296.8m

CDC Group, the UK government-owned development finance institution, has unveiled its 2014 annual results, revealing a positive year for the institution.

The group recorded a total return after tax of £420 million (€590 million; $661 million), more than three and a half times the £117.3 million (€164.9 million; $184.7 million) return the previous year. This represents a profit of 14.2 percent this year and an average total return of 6.9 percent over the last five years.

CDC has also had a strong year on the investment front, making 19 new investment commitments totalling £296.8 million (€417.1 million; $461.8 million).

CDC committed a total of £88.1 million to six funds: $30 million to Rabo Equity Advisors’ India Agribusiness Fund II, which is targeting $200 million; $40 million to Investec Africa Frontier Private Equity II, which is seeking to raised $350 million; $32.8 million to Africinvest Fund III; $10 million to Synergy Private Equity Fund, a first-time fund for Lagos and Accra-based Synergy Managers; $20 million to pan-Africa infrastructure vehicle Africa Renewable Energy Fund; and £2.8 million to Advans. The group also made £208.7 million of direct investment commitments.

CDC’s total net assets grew from £2.95 billion in 2013 to £3.37 billion in 2014, with the portfolio value increasing from £2.5 billion to £2.9 billion.

In 2012 CDC launched a new strategy, narrowing its geographical focus down to Africa and South Asia, introducing a wider range of investment products, and focusing on job creation. As part of this the group chose seven “priority sectors” for investment because of their greater propensity to create jobs: infrastructure, financial institutions, manufacturing, agribusiness, construction, health, and education. At the end of 2014, 63 percent of CDC’s portfolio was in these priority sectors.

At the end of 2014, 70 percent of CDC’s portfolio was in Africa and South Asia – 47 percent and 23 percent respectively – with the balance made up of investments made pre-2012 outside CDC’s current focus geographies.

In the group’s annual review, chief executive Diana Noble said the 2014 financial results reflect investment decisions taken prior to 2012.

“Net assets were exceptionally boosted during the year by large currency gains, increases in the legacy China portfolio as well as infrastructure investments in Africa and Latin America made a number of years ago,” she said. “It will take a few more years for the evidence of the returns from the new strategy to become fully visible; during 2014 this part of the portfolio generated 2.7 percent pa in US$. Further endorsement of our progress came from the trebling of CDC’s stand-by bank facility with improved terms from US$400m to US$1.2bn with ten commercial banks.”

Of its $461.8 million of commitments in 2014, $240.9 million went to Africa, $141.5 million to South Asia, and $79.4 million to pan-regional investments. Equity accounted for $131.5 million, debt for $122.5 million, funds for $132.8 million and trade finance for $75 million.

At the end of 2014, 1,331 businesses across 74 countries were supported by CDC capital, and businesses in CDC’s Africa and Asia portfolio directly employed 533,000 workers. These businesses paid tax worth $2.34 billion to local governments. According to analysis CDC-backed businesses contributed to the creation of nearly 1.3 million new direct and indirect jobs last year.