Presentation to Portfolio Committee Chairperson of the Board 13 - - PowerPoint PPT Presentation
2015/2016 APP Presentation to Portfolio Committee Chairperson of the Board 13 October 2016 Slide 1 Table of Content Performance at a glance Annual Performance Plan Financial Performance Project delivery and Service Performance HR
2015/2016 APP Presentation to Portfolio Committee
Chairperson of the Board 13 October 2016
Slide 1
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Project delivery and Service Performance HR Performance Risks Conclusion
Slide 2
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Project delivery and Service Performance HR Performance Risks Conclusion
Slide 3
What does each axis represent? Customers Revenue Cost of Sales
Growth of the customer base from 18 to 23 as at March 2016 Steady growth in year on year revenue from R366m to R451 which bodes well for placing the Company
Broadband Infraco is realising the benefit
migrating new customers onto its own infrastructure; thereby reducing lease costs from third parties. The Company is also optimising its colocation; metro- lease and maintenance cost inputs continuously.
Performance at a glance: Overall
Customers, Revenue and Cost of Sales and Capacity
943 1 097 1 514 2011 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 2012/2013 2013/14 2014/15 2015/16
STM-1 equivalents
1 1 4 9 11 14 18 23 5 10 15 20 25 R 0 R 50 000 000 R 100 000 000 R 150 000 000 R 200 000 000 R 250 000 000 R 300 000 000 R 350 000 000 R 400 000 000 R 450 000 000 R 500 000 000
2009 2010 2011 2012 2013 2014 2015 2016
Customers Revenue Cost of Sales
Province POP Fibre (Km) Eastern Cape 19 1799 Free State 17 1471 Kwazulu Natal 21 2354 Limpopo 11 883 Mpumalanga 15 1422 North West 9 940 Northern Cape 27 2499 Gauteng 17 1407 Western Cape 20 1887 Totals 156 14661
Slide 4
Performance at a glance: Procurement
112 37 101 41 291 49 13 58 12 133
100 150 200 250 300 350 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Millions
Annual Procument Spend
2014/15 2015/16 291 330 103 33 1 8 133 151 72 32 8
100 150 200 250 300 350 BBBEE Spend BBBEE Multiplier BOE BWO PWD BYO
Millions
Annual B-BBEE Spend
2014/15 2015/16
Slide 5
151,176 3,925 ,345 5,609 ,118
40,000 60,000 80,000 100,000 120,000 140,000 2011 2012 2013 2014 2015 2016
Amount (R'000) Financial Year
Incurred and Identified in the Current Year
Performance at a glance: Irregular Expenditure
The new SCM Policy implemented
Slide 6
Irregular Expenditure
Performance at a glance: External Audit
Department Finding Category Total number of findings 2013/14 Total number of findings 2014/15 Total number of findings 2015/16 Finance Going Concern (Repeat) 1 1 Compliance 3 4 Commitments; Provisions and Revenue 5 3 Property Plant and Equipment (Repeat) 6 6 Trade and other payables 1 Irregular, fruitless and wasteful expenditure 3 SCM Compliance 8 HRM Compliance 3 CEO OFFICE* Compliance :Performance Information 2 5 Shareholder Compliance (Repeat) (MOI) 1 1 1 Sales & Marketing Revenue 1 Total 28 19 8
Slide 7
Relates to stretched targets determined in the 2nd quarter of the year
*the audit points relate to reporting stretch KPI’s only and not reflecting the original APP submission. This has been resolved and the Annual Report reflects both the original submission and the stretch on pages 18- 21
Governance: Status of the drivers of internal control
Slide 8
Effective leadership culture
Financial and Performance Management
Governance
Oversight responsibility HR Management Policies and Procedures Audit Action Plans IT Governance
Leadership
Proper record keeping Processing and reconciling controls Regular reporting Compliance Monitoring IT System Controls Proper record keeping Proper record keeping Proper record keeping
Improved Unchanged Regressed
2013/14 2014/15 2015/16 APP Achievements 89.47% of the Shareholder Compact 83% of the Shareholder Compact 87.50% of the Shareholder Compact EBITDA Negative Negative Positive Proclamations Presidential Proclamation signed
2014, effectively transferring Broadband Infraco from the Department of Public Enterprises to the Department of Telecommunications and Postal Services Irregular Expenditure identified during the year R6 535 000 R38 000 Zero irregular expenditure Awards Overall award and “A” in compliance, internal audit and internal control NOSA Accreditation and ISO 18001 successful audit Audit Opinion Unqualified audit report Unqualified audit report Unqualified audit report
The turnaround strategy (BGE) as a driver of performance
Slide 9 2014 restated as 926K was erroneously classified as irregular
Integrated Reporting Highlights
Slide 10
Environment Economic Customer- centric Social
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Project delivery and Service Performance HR Performance Risks Conclusion
Slide 11
Shareholder Compact Achievements
Key Performance Indicator Target Achieved Results Network Performance Rebates as percentage of gross revenue ≤3% of customer revenue 0.10% Percentage increase of actual revenue 28% increase in revenue 24% Network Saleability
Financial Sustainability Overall increase in capacity at STM-1 160STM-1 497 STM-1 Equivalent Number of KM of fibre added to the 100 km by 31March 2016 420.05km Network Oberholzer to Ramatlabama Link Link upgrade by end of Mar 2015 Link upgraded Upgraded to DWDM successfully
Network Improvement Percentage decrease of cost of sales 10% decrease of CoS (17.6%) excluding depreciation
Decrease amount of Operating Loss (R133mil) decrease (R91.4 million) in operating loss
Slide 12
Shareholder Compact Achievements
Key Performance Indicator Target Achieved Results
Training spend as percentage of payroll 1% 1.33% Allocation of BBBEE budget discretionary 70% 114% spend Percentage increase on BOE spend 40% of BBBEE 54.1% Increase in number of direct jobs 40 indirect jobs 686 indirect jobs created Maximise socio-economic contributions Percentage spend of YOE 10% of 40% spend 10.7%
Percentage spend on BWO 10% of 40% spend 44.5%
Economic Transformation Number of digital learning tools 60 tablets 60 procured and delivered
Number of Points of Presence 5 PoPs 33 PoPs optimised
Percentage increase spend on PWDOE 1% 0.1% Slide 13
Stretch Targets
Stretch target Achieved Result A higher target was set for the following KPI’s Percentage increase of actual revenue 28% 32% 24%
Percentage decrease of cost of sales excluding depreciation 10% 12% (17.6%)
Overall increase in capacity at STM-1 at STM-1 Equivalent 160 668 497
Number of KM of fibre added to the Network 100km 250 km 420.05km
To drive optimal cash management the following KPI’s were added Number of days per outstanding customer invoices 45 days plus 15 days per contract 26 days
Number of days for unallocated creditors Unallocated creditors less than a week Allocated within a week
To drive actual project delivery the following KPI replaced the number of projects delivered KPI Number of points of presence
connection points 41 POP’s
33 POPs
Slide 14
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Project delivery and Service Performance HR Performance Risks Conclusion
Slide 15
Statement of Financial Performance
R’m Audited March 2012 Audited Restated March 2013* Audited March 2014 Audited March 2015 Audited March 2016 Revenue 394 237 302 366 452 Cost of sales (276) (172) (153) (314) (260) Gross profit 118 65 149 51 192 Operating expenses (258) (262) (312) (311) (292) Results from
(140) (197) (163) (260) (100) Finance income 54 22 20 15 9 Finance costs (9) (2)
before taxation (95) (175) (143) (245) (91) Income tax expense
the year (95) (175) (143) (245) (91) EBIDTA (27) (81) (36) (145) 30
Revenue increased by 24% to R452 million. Cost of sales decreased by 18% to R260 million. Operating costs decreased by 6% to R292 million. Operating loss decreased from R245 million to R91 million.
* Review of useful life R6.7m restatement
Slide 16
Revenue and Cost of Sales
Revenue increase resulted from: Additional revenue from key customers; New contracts (from new customers) concluded during the year; and Retention of existing customers
394 237 302 366 452
2012 2013 2014 2015 2016
Revenue R'm
Lower cost of sales, mainly due to: Lower fibre lease and maintenance costs due to favourable negotiations with suppliers; Continual drive to optimise costs; Optimal designs; and Vigilant oversight on all financial outlays.
Slide 17
Operating expenses
projects that increased depreciation
reduction in previous year
employees
168 144 170
80 86 102 115 103 5 7 7 6 7 8
2012 2013 2014 2015 2016
Employee Expenses R'm
salaries directors Bonus
163 144 180 185 151
110 115 123 115 130
2012 2013 2014 2015 2016
Depreciation and Amortisation R'm
Slide 18
Financial Position
1190 1219 1476 1338 1368 64 48 175 257 49 442 343 442 157 141 2012 2013 2014 2015 2016
Assets R'm
Equipment Accounts Receivable Cash 1522 1348 1208 964 873 103 94 610 617 575 71 168 275 171 110 2012 2013 2014 2015 2016
Equity and Liabilities R'm
Equity Deferred Income Current Liabilities
Slide 19
Cash Flow Position
442 343 442 157 141 2012 2013 2014 2015 2016
Cash and Cash Equivalents R'm
69 10 329
137
2012 2013 2014 2015 2016
Cash from operations R'm
155 144 199 148 161
2012 2013 2014 2015 2016
Cash used in investing activities R'm
34
2012 2013 2014 2015 2016
Cash from financing activities R'm
Slide 20
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Infrastructure delivery and Service Performance HR Performance Risks Conclusion
Slide 21
2015/16 Infrastructure Rollout Performance
Province Fibre km completed Fibre km in Progress % Fibre roll-out completed PoPs Completed PoPs In Progress % PoP/Site optimisation completed Eastern Cape 88.6 24.5 78% 5 3 63% Western Cape 320.3 10.5 97% 4 1 80% Gauteng 253.6 100% 4 100% Limpopo 69.3 100% 3 100% Mpumalanga 123.9 8 94% 3 1 75% North West 101.7 11.7 90% 3 1 75% Northern Cape 7.9 3.5 69% 1 1 50% KZN 147.2 100% 8 100% Free State 5.3 4.9 52% 2 1 33% National 1117.8 63.1 95% 33 8 80% Slide 22
Slide 23
Customer services performance
Customers performance statistics
Slide 24
99,95 99,97 99,86 98,08 100,00 100,0099,95100,00 100,00 100,00 98,58 100,0099,90100,00 100,0099,79100,0099,82 99,77100,00 100,00 100,00 99,5 99,5 99,5 95 99,5 99,5 99,5 99 99,5 99 98 95 99,5 95 99,5 99,5 98 98 98 98 95 99,5 92,00 93,00 94,00 95,00 96,00 97,00 98,00 99,00 100,00 101,00 YTD Average Service Performance Highest Contracted SLA
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Infrastructure delivery and Service Performance HR Performance Risks Conclusion
Slide 25
5 10 15 20 25 50 100 150 200 250 actual headcount approved headcount customers
Broadband Infraco was licensed in the last quarter of 2009 49% growth human resources within the maintenance, sales and marketing environment for the 2010/2011 year 2011/2012 insourcing of the Network Operations Centre and integrating it into one environment to service all customers January 2012 marked the end of Rights of Use Agreement and instilling HR discipline in the organisation Refocus on acquisition of critical skills required for the growth of the organisation as well as optimisation of performance management Productivity analysis and HR Optimisation The split between core and support as at 31st March 2016 is as follows: Core = 72%, Support = 28%
Headcount Overview: Resourcing of the environment
Employment Equity Demographics (Inclusive of Interns)
Job Levels
2012 2012/13 2013/14 2014/15 2015/16
Executives 6 9 7 7 8 Senior Management 19 13 18 23 17 Professional Specialist & Middle Management 41 39 32 36 48 Supervisory & Junior Management 77 68 92 91 68 Support 14 15 21 19 10 Sub Total (Permanent) 157 144 170 176 150 Interns 11 2 11 10 1 GRAND TOTAL 168 146 181 186 151
Headcount Movement vs Customer Growth
Slide 26
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Infrastructure delivery and Service Performance HR Performance Risks Conclusion
Slide 27
Top Strategic Risks
2015/2016 Mitigation 2016/2017 Inability to continue as a going concern Auditors reassessed the going- concern principles and concluded the audit with emphasis of matter in the audit report Likelihood not to continue as a going concern Inability to resolve fulfilment value chain Enterprise Project Management Processes, policy and methodology were Limitations in resolving fulfilment value chain Margin Pressure Cost containment measures were
that resulted also in the decrease of cost of sales Margin pressure Non ICT SOCs like Eskom and Transnet planning to provide dark fibre dark fibre telecoms services Engagement with SOCs The impact of Non ICT SOC's on the cost to communicate Non – Payment of creditors This risk has been retired Lack of awareness for new imperatives in privacy and security of information Inability to raise funds Cost containment and increase in sales Difficulty to raise Funds Adversarial long term relationship with Neotel This risk has been retired as Neotel is being treated as any other customer Damage to the reputation of Broadband Infraco Inability to break even by June 2016 Addressed as an operational risk Slow evolution towards IP technology market services Inability to attract and retain Inability to retain and attract the required skills
Slide 28
Table of Content
Performance at a glance Annual Performance Plan Financial Performance Infrastructure delivery and Service Performance HR Performance Risks Conclusion
Slide 29
We continue to deliver on our mandate and drive a high performance institution grounded on sound governance Liquidity continues to be a challenge and we will continue to work with our shareholders to resolve the problem
Slide 30