| onderstepoort biological products © | 13 march 2012

| Onderstepoort Biological Products © | 13 March 2012


• Introduction of OBP Delegation

• OBP Background

• Governance

• OBP Corporate Plan

• Review process

• OBP’s Alignment to Government programmes

• Strategic Objectives

• Key Objectives and indicators

• Financials

• Performance Monitoring

• Conclusions

PRESENTATION OUTLINE

OBP DELEGATION

• Board Members

Dr JH Adams : Chairperson

• Mr NT Baloyi : non- executive director

• OBP Executives

o Dr Theresa Smit : Acting CEO and COO

o Mr Matsobane Gololo : CFO

o Mrs Ntombizodwa Mobeng – General Manager : Legal, Compliance &

Company Secretary



OBP BACKGROUND

Historical Perspective

1908: Establishment of Onderstepoort Veterinary Research Institute

1968: Dedicated vaccine facility established

1981: Vaccine facility operated with trade account and able to begin to fund

operations from sale of vaccines

1992: OBP separated from OVI, which became part of the ARC

2000: OBP incorporated on6th September (OBP Incorporation Act 19, 1999)

2001: OBP received funding of R9 million (last grant received, to date)

2005: State owned land and buildings officially transferred to OBP

2007: Achieved ISO 9001:2008 certification

2010: Achieved a revenue milestone > R 100 million

2011: Achieved revenue milestone > R 160 million


Vision, mission and mandate


Mandate: OBP exists to prevent and control animal diseases that impact food security, human health and livelihood

Vision: To be a global biotech manufacturer of animal health products, underpinned by a skilled, innovative and passionate staff

Mission of OBP:The mission of OBP is to translate science into biological and health products, knowledge and technology resulting in improved animal and human health, food security and safety, for all stakeholders.

The primary objective of OBP is to manufacture/produce quality vaccines for the prevention and control of livestock diseases in South Africa, Africa and globally.

Visionary Themes


Vision 2020To become a global centre of

excellence in veterinary vaccinology driven by our

innovative employees

Recognised centre of scientific excellence

Profitability and growth

sustainability

Production efficiencies and

optimisation

Product range expansion

Employer of choice

Products and processes

Diversification into

human health

Recognised brandlocally and

globally

Effective distributionnetwork and

satisfied customers

Cost efficiencies and optimisation

Regulatory compliance

company wide

Innovative organisation

>>

>

>

>

>

>>>>

> >Identified during strategy session and presented in OBP Strategic Plan 2009-2013

Workforce Profile


Occupational Levels

Male Female Total

A C I W A C I W

Executive Management

2 0 0 1 2 0 0 1 6

Management 7 2 1 5 6 0 0 1 22

Skilled/advanced operational

26 2 0 9 24 1 0 13 73

Semi-skilled 33 0 0 0 30 0 0 7 70

Basic skilled 21 0 0 0 8 0 0 0 32

TOTAL PERMANENT

88 4 1 15 72 1 0 22 203

Interns and Learners

4 0 0 0 3 0 0 0 7

GRAND TOTAL 92 4 1 15 75 1 0 22 210

OBP Product Portfolio

Rift Valley Fever – live, inactivated, Clone 13 African horse sickness Bluetongue B-Phemeral Chlamysure Lumpyskin

PI and IBR (in Leukopast 3)• Fowl Pox• ORF• Equine Influenza


• Actinomyces (Corynebacterium) pyogenes

• Anthrax• Black Quarter• Botulism• Botulism/black quarter • Blue Udder• Brucella Rev 1• Brucella S19• Calf paratyphoid (live & inactivated)• Corynebacterium Ovis• E Coli• Enterotoxaemia (pulpy kidney)• Fowl Typhoid• Gangrene Complex• Haemophilus Coryza• Lamb Dysentry• Leukopast 3 (with IBR and PI)• Leukopast• Pasteurella Bovine• Pasteurella Ovine• Septicum• Swelled Head• Tetanus• Vibrio (Campylobacter)

Other ProductsFrozen infective blood against (in conjunction with ARC-OVI)

• Anaplasmosis• Heartwater• Redwater African / Babesiosis • Redwater Asiatic / Babesiosis

Antiserum Diagnostic Reagents (eg dourine, rose bengal)

Bacterial Vaccine Products Viral Vaccine Products

• Unqualified audits from period of 2000/1 to 2009/10 FYs

• Qualified audit for 2010/11 FY

• Achieved R100 m sales in 2010/11 FY and R 160m in 2011/12 FY - largely attributable

to significant sales of RVF vaccines due to RVF outbreak in several provinces

• Significant declines in sales and sales revenue in current FY (2011/12) and thus

expected to achieve revenues well below budget (R20m-R25m below budget)

• Profitability – average of 23% improvement in margins

• Product innovation – launched 4 products in 2011 FY


Business Performance


GOVERNANCE

Governance of OBP

State owned company (SOC) of the Department of Agriculture, Forestry and

Fisheries (DAFF)

3B entity under Public Finance Management Act (PFMA) and Treasury Regulations

Registered taxpayer

OBP Incorporation Act (OBP Act no 19, 1999)

Corporate governance codes & protocols

National Key Point

ISO standards & business specific regulatory authorities


Board of Directors o Board was appointed on 1 March 2011 and Chairperson of Board on 1 June 2011

o 3 Sub-committees have been formed

o Audit, Risk and IT Committee

o Remco, HR and Ethics Committee

o R&D, Sales and Marketing, Operations and Quality Committee (RDSMO&Q

Committee)

o Committees and board scheduled to meet 4 times per annum


Board of Directors


From left, back row: Ms ND Mobeng (Company Secretary); Dr AT Kgasi; Dr ST Cornelius (Acting Chairperson); Mr NT Baloyi

From left, front row: Dr PE Hanekom and Dr AH Graham

Appointed 1 March 2011

Absent in photo: Mr JH Adams (Chairperson)

OBP Structure


VACANT

OUTSOURCED


Executive Management Team

Dr Theresa SmitActing CEO/COO

Mr Matsobane GololoCFO

Dr Jacob ModumoBDO

Ms Nompumelelo RamutleHR Executive

Mr Pieter PietersonQuality Executive

Ms Ntombizodwa MobengGM: Legal, Compliance &

Company Secretary

Dr Jeanette HeathActing CSO


OBP CORPORATE PLAN2012/13 to 2015/16

Annual Strategy Review Process Situational analysis conducted

• Sales and Marketing (external and competitor environment)

• Financial position of the organisation

• Production (challenges and capabilities)

• Other Divisions

SWOT analysis

Review/identification of strategic goals

• Identification of key outcomes and targets of goals identified

Considered available internal resources required to successfully implement strategy

o Prioritisation

Alignment of OBPs strategy to government initiatives/plans

Compliance – National Treasury framework for Strategic Plans and

Annual Performance Plans



Governm

ent

wide plans

Strategic Plan

Annual Performance

Plan

Planning Cycle Concepts

Alignment to Government Programmes


As an SOE, OBP will strive to contribute towards the following programmes/initiatives: Medium-term strategic framework :

o Outcome 5 – Skilled and capable workforce to support an inclusive growth path.o Outcome 7 – Vibrant, equitable, sustainable rural communities, contributing

towards food security for all

New growth path – o Job driver 2 – Improving job creation in economic sectors: Agricultural value

chain & Manufacturing.o Job driver 3 – Seizing the potential of new economies: Knowledge economy

DAFF’s strategic objectives:o Strategic Goal 1: Increased profitable production of food, fibre and timber

products by all categories of producers (subsistence, smallholder and commercial

o Strategic Goal 5: Increase contribution of the sector to economic growth and development


Government programme

Strategy OBP Alignment

MTSF

Outcome 5: Skilled and capable workforce to support an inclusive growth path.

o Human capital development programme o Learnership and Internship programmes.

Outcome 7: Vibrant, equitable, sustainable rural communities, contributing towards food security for all.

o Promotion of vaccination as a cost-effective measure to manage diseases and improve livestock production.

o Continued development and manufacturing of vaccines against economically important animal diseases.

New growth path

Jobs driver 2: Agricultural value chain o Vaccines continue to play a critical role as a cost effective solution to animal health during the critical livestock production phase.

Job Driver 2: Seizing the potential of new economies

o There is a need to transition into new innovative “3rd generation biotechnology” for safer, more efficacious and affordable vaccines.

Jobs driver 2: Manufacturing – IPAP2 (Scale-up and broaden interventions in the Plastic, Pharmaceutical and Chemical sectors)

o Increased revenues from local and export sales of OBP products into current and new markets once the manufacturing facility is GMP certified resulting in job creation.



Government programme

Strategy OBP Alignment

DAFF Strategic

Plan

Strategic Goal 1: Increased profitable production of food, fibre and timber products by all categories of producers (subsistence, smallholder and commercial)

Strategic Goal 5: Increase contribution of the sector to economic growth and development

o OBP’s mandate is to assist government in the control and prevention of animal diseases that impact food security and public health

o Improved animal health and reduction in losses due to morbidity or mortality of animals, and ability to export to other markets will contribute to the growth and development of the livestock (agriculture) sector


Strategic Objectives


SG 1: Build a successful, high performance organisation

SG 2:Improved business processes and management

practices

SG 3: Build a profitable and sustainable company


Strategic Goal 1:

Build a successful, high performance organisation

Objective statement To build an innovative, passionate, high performance culture through a highly skilled and motivated workforce through improved and on-going human capital development and management:

1.1 Improved and on-going human capital development and management

1.2 Improved alignment of organisational structure to strategy

1.3 Build the brand recognition of OBP

1.4 Drive a high performance culture

1.5 Design and implement a change enablement framework for OBP

1.6 Build a customer-centric and service-focussed business

Baseline Workforce that requires further skills enhancement to align to changing technology, processes and quality standards and increased ability to innovate.

Structure needs to be aligned to strategy

HR and organisational development plan in process of being implemented

Justification There is a need to introduce significant change in the organisational culture, mind set and performance of employees in the organisation to enable the organisation to adapt to changes in quality, production and industry trends and technology. This will ensure that we reap the benefits of an engaged and diverse workforce


Strategic Goal 2:

Improve business processes and management practices

Objective statement To improve business processes and management practices through the following:2.1 Optimise business processes through implementation of the Enterprise Resource Planning (ERP) system2.2 Provide service delivery support throughout the organisation - Security management, legal services, stakeholder and communication services and IT2.3 Improved financial management and reporting of the company2.4 Manage and achieve efficiencies across the full value chain for vaccine production2.5 Invest in upgrading the quality and manufacturing systems to comply with local and foreign standards2.6 Effective plant and utilities management 2.7 Achieve compliance and governance throughout the organisation2.8 Develop a sustainable Corporate Social Investment (CSI) programme

Baseline Profitable company with zero debtManual processes and reportingOutdated production systems, processes, facilities and equipmentISO 9001:2008 certified

Justification There is a critical need to improve efficiencies and productivity across the organisation – to reduce costs, increase yields and value add and to ensure the profitability and sustainability of the organisation.Improved business processes and practices are required to improve access to critical information and reports to guide the decision making of the organisation in the short- and long-term.


Strategic Goal 3:

Build a profitable and sustainable company

Objective statement

To build a profitable and sustainable company focussed on core competencies that will drive future growth and opportunities through the following:3.1 Increase OBP’s market share in vaccine sales (volume and revenue)3.2 Increase revenue and profits3.3 Enhance and invest in product development and innovation3.4 Commitment to environmental principles in business operations

Baseline Profitable businessDeclining market share1st and 2nd generation productsCommercial products, orphan disease products and products for social good and many with no or negative gross profit marginsMany products in declining phase of products life-cycleLimited environmental awareness

Justification There is a need to increase and grow local and export market share to ensure the sustainability of the organisation and to ensure that our growth strategy is done in a socially responsible manner There is a need to develop new and improved quality 3rd generation and/or combination vaccines to meet the livestock market needs/demands in South Africa and Africa.The organisation needs to operate within the strategies and initiatives of the government and to ensure operations contribute to a sustainable environment.


Strategic Goal

Initiatives Estimated budget allocation

SG 1

2012/13 2013/14 2014/15Training costs R 800 000 R 1 200 000 R 1 200 000Branding R 600 000 R 800 000 R 800 000Total R 1 400 000 R 2 000 000 R 2 000 000

SG 2

Operational expenditure R 58 865 598 R 62 220 937 R 65 767 531Repair and Maintenance R 4 107 075 R 4 341 178 R 4 588 625Utilities Costs R 4 200 000 R 4 439 400 R 4 692 445Quality control costs R 30 000 R 31 710 R 33 517Experimental animal costs R 3 865 567 R 4 085 905 R 4 318 810Total R 71 068 242 R 75 119 131 R 79 400 931

SG 3

R&D and innovation R 7 806 446 R 8 894 354 R 9 428 015

Marketing/branding R 3 441 180 R 3 811 866 R 5 587 437

Administrative costs R 15 598 309 R 15 247 464 R 16 162 311

Total R 26 845 935 R 12706 220 R 31 177 763

Estimated Budget Allocation to Key Initiatives of each of the Strategic Goals


FINANCIALS2012/13 to 2015/16

Financial Projections – Income statement


ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDIncome Statement for the year ended 31 March

Forecast2011/12 2012/13 2013/14 2014/15R'000 R'000 R'000 R'000

Revenue 98 603 119 870 127 062 134 686 Cost of sales 37 729 43 982 46 621 49 418 Gross profit 60 874 75 888 80 441 85 268 Operating income 1 270 675 714 754 Administrative expenses 13 205 15 598 16 487 17 427 Operating expenses 52 912 58 865 62 220 65 767 Operating profit/ (Loss) (3 973) 2 100 2 448 2 828 Interesr received 5 956 4 060 4 263 4 476 Profit before tax 1 983 6 160 6 711 7 304 Tax 555 1 725 1 879 2 045 Net profit for the year 1 428 4 435 4 832 5 259

MTEF Budget

Financial Projections – Balance Sheet


ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDBalance sheet at 31 March

Forecast2011/12 2012/13 2013/14 2014/15R'000 R'000 R'000 R'000

AssetsNon-current assetsProperty, plant and equipment 90 261 148 816 235 791 304 110

Current assetsInventories 20 252 21 265 22 328 23 445 Trade and other receivables 11 305 11 870 12 464 13 087 Cash and cash equivalents 105 664 101 870 96 891 88 716

137 221 135 005 131 683 125 248

Total assets 227 483 283 821 367 474 429 358

Equity and liabilityEquityShare capital 1 1 1 1 Retained earnings 174 474 178 909 183 741 185 786

174 475 178 910 183 742 185 787

Non-current liabilities 29 782 79 306 156 880 215 404

Current liabilitiesTrade and other payables 20 826 23 192 24 319 25 506 Provisions 2 400 2 413 2 534 2 660

23 226 25 605 26 853 28 167

Total equity and liabilities 227 483 283 821 367 474 429 358

MTEF Budget

Financial Projections – Cash Flow Statement


ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDCash flow statement at 31 March

Forecast2011/12 2012/13 2013/14 2014/15R'000 R'000 R'000 R'000

Cash flow from operating activitiesCash receipts 98 603 119 305 126 468 134 063 Cash paid to suppliers and employees 105 419 116 851 123 462 133 786 Cash generated from operations 6 816 2 454 3 006 277 Interest received 5 956 4 060 4 263 4 476 Taxation paid 9 479 286 1 726 1 878

10 339 6 228 5 543 2 875

Cash flow from investing activitiesPurchase of propert, plant and equipment 34 614 62 522 91 073 72 549

34 614 62 522 91 073 72 549 Cash flow from financing activitiesFunding from government/3rd party 52 500 80 550 61 500

- 52 500 80 550 61 500

Net increase in cash and cash equivalents 44 953 3 794 4 980 8 174

Cash and cash equivalents at beginning of the year 150 617 105 664 101 870 96 891 Cash and cash equivalents at end of the year 105 664 101 870 96 891 88 716

MTEF Budget

Facilities and Equipment upgrade/replacement


Project name 2011/12 2012/13 2013/14 2014/15 Total

Replacement/upgrading of

production and packaging

equipment

R 26.3m R 34.0m R 50.55m R 55.5m R 166.35m

Facility upgrade: Phase I

and part of Phase II

R 1.8m R 18.5m R 30m R 6m R 56.3m

Total R 28.1m R 52.5m R 80.55m R 61.5m R 222.65m


PERFORMANCE MONITORING

Performance Monitoring

o Effective implementation of strategy

o Impact of strategic initiatives :

o Achievement of KPI’s

o Strategic goals achieved

o Sustainability

o Use experience in annual reviews

o Quarterly performance monitoring

o Annual performance reporting:

o Treasury regulations – Auditor General

o Pre-determined objectives

o Performance Management of Employees

o Alignment to organisational strategy

o Quarterly or bi-annul performance

monitoring of employees



CONCLUSIONS

Conclusiono At an operational level :

o Despite significant growth due to RVF vaccine sales in 2009/10 and 2010/11 the business has is likely to stabilise at an estimated revenue of R 90m – R105m

o Investing profits in:o Development of new vaccines.o Replacing critical equipment to maintain manufacturing capacity.

o Emerging sector: o Support through provincial governmento Rural vaccine distribution opportunities

o Skills development prioritised: o Learnership and Internship programmeo Bursaries and development programme o Training budget increased.

o GMP project high priorityo OBP not in a position to fund this on its own – support from DAFF, other

government entities or third parties is required



THANK YOU

Dr Theresa SmitActing CEO/COO

www.obpvaccines.co.za

| onderstepoort biological products © | 13 march 2012

Documents