| onderstepoort biological products © | march 1,...

| Onderstepoort Biological Products © | March 1, 2011

OBP Delegation

o Mr Ayanda Ntsho CA (SA) – Acting Chief Executive Officer

o Mr Caiphus Ramoroka – Strategic Projects & Planning Executive and Acting Chief Scientific Officer

o Dr Jacob Modumo – Business Development Officer

o Mrs Ntombizodwa Mobeng – Company Secretary and Legal Advisor

o Mr Kolobe Mashala CA (SA) – Acting Chief Financial Officer

o Department of Agriculture, Forestry and Fisheries Officials


Introduction

o Incorporated in 2000 – OBP Incorporation Act 19, 1999 (OBP Act)

o Incorporated to ensure financial viability & sustainability – access to technology, GMP

facilities, etc.

o Facility build in 1968:

o R&D, Manufacturing, QC labs and Experimental Animals facilities.

o Product Portfolio: >50 products – specific to local needs

o Vaccines (viral, bacterial, protozoal diseases) & Diagnostic reagents.

o Business Performance:

o Revenue growth – av. 15% (year on year) in the last 3 years.

o Achieved R100 m sales in 2010 FY.

o Profitability – av. 23% improvement in margins.

o Product innovation – launched 4 products in 2011 FY.

o No. of employees:

o 205


Governance

o Board has been appointed and awaiting announcement of members

o Induction is planned

o Sub-committee members to be appointed


OBP Structure


Mandate & Vision

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 team.

7 Strategic Thrusts: 1. Increase net operating profits.

2. Increase market share.

3. Build partnerships with provinces to gain access rural farmers.

4. Strategic vaccine bank in partnership with DAFF.

5. Funding for Manufacturing plant recapitalisation and GMP compliance.

6. Development of new products.

7. Human capital development.


Annual Strategy Review Process

o Consider major developments and changes in the industry – global & local

view.

o Consider available internal resources required to successfully implement

strategy.

o Prioritisation

o Ensure OBP’s alignment to the MTSF and the New Growth Path.

o Compliance - PFMA framework.


Review Outcomes – Strategic Objectives


Sustainable delivery of

OBP mandate

Volume growth

Improve margins

Innovation

R&D investment New markets –

emerging sector & exports

Recapitalisation – GMP compliance

HCD & Performance

Review Outcomes – Strategic Objectives


o Strategic Objectives:

o SO1 – Build an innovative, passionate, high performance culture.

o SO2 – Build a profitable, sustainable and socially responsible biomanufacturing

company.

o SO3 – Focus on core competencies and unique strains, products and know-how to

develop new product & leverage strategic partnerships.

Financial Key Performance Indicators

Indicator Key

Business

Area

Current Projections

2010/11 2011/12 2012/13 2013/14

Sales revenue growth Financial

Performance

R95m R130m R141m R157m

Sales volume growth Financial

Performance

10% 10% 10% 10%

Percentage cost of sales (COS)

to sales -

Financial

Performance

40% (R56.4m) 36% (R46.8m) 36% (R51.5m) 32% (R50.2m)

Cost reduction on operating

expenses

Financial

Performance

0% 5% (R3.6m) 5% (R3.5m) 5% (R3.5m)

% Operating profit Financial

Performance

0% (R0m) 10% (R13m) 15% (R21.2m) 20% (R31.4m)


Non-Financial Key Performance Indicators

Indicator Key Business

Area

Current Projections

2010/11 2011/12 2012/13 2013/14

Number of new and improved

vaccines developed and registered

with Act 36, 1947 (SA) and other

countries.

R&D

(Innovation)

3 1 2 3

Number of doses of vaccines

produced per year.

Manufacturing 84.6 million 92.3 million 100 million 107 million

Percentage training budget to

sales.

Human

Resources

0.4%

(R0.5m)

1.0%

(R1.2m)

1.0% (R1.3m) 1.0% (R1.5m)

Improvement of quality

management systems - ISO 17025

certification

Quality - 20% of

project

schedule

50% of project

schedule

100% of

project

schedule

Number of strategic partnerships

with provincial governments

targeting emerging farmers.

Sales &

Marketing

3 3 3 -


The role OBP continues to play in the economy

o As an SOE, OBP will strive to contribute towards economic growth and

creation of job opportunities:

o 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.

o 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.

o DAFF’s strategic objectives.


ALIGNMENT TO GOVERNMENT PROGRAMMES

New Growth Path -

Improving job creation in

economic sectors

(Agricultural value chain)

DAFF:

Strategic Goals 1 & 5

(Growth in food production value

chain)

OBP:

Strategic Thrusts 1, 2 & 6

(Growth + Innovation)

OBP:

Strategic Objective 2

(Profitability & sustainability)

New Growth Path –

Improving job creation in economic

sectors

(Manufacturing: IPAP2)

DAFF:

Strategic Goal 5

(Investment, growth + market access)

OBP:


(Sustainable Infrastructure

Investment - GMP)

OBP:



New Growth Path –

Seizing the potential of new economies

(Knowledge economy: IPAP2)

DAFF:

Strategic Goal 5

(Research leadership & support)

OBP:

Strategic Thrust 6

(New product development)

OBP:


(Focus: Unique strains, products,

know-how)

MTSF Outcome 5 –

Skilled and capable workforce to support an inclusive growth path.

DAFF:


(Transformation through skills development)

OBP:

Strategic Thrusts 6 & 7

(Skills development + Innovation)

OBP:

Strategic Objectives 1 & 3

(HCD + Innovation & Performance)

MTSF Outcome 7 - Vibrant, equitable, sustainable rural

communities, contributing towards food security for all.

DAFF:

Strategic Goals 1, 4 & 5

(Equitable participation of

emerging sector in mainstream economy)

OBP:


(Improved access of vaccines to emerging

sector)

OBP:

Strategic Objectives 2 & 3

(Sustainable support of emerging sector

through innovation)


OBP’s role in the economy – Livestock & food production

o Animal health plays an important role in the sector’s outputs and productivity.

o Vaccines - most important & cost-effective solution of preventing infectious disease

o Strategy:

o Improved manufacturing efficiencies:

o 8% improvement in gross profit margins.

o Improved availability of products:

o Achieve 85% of planned vs. actual sales forecast.

o 5% reduction in operating costs

o Grow market share:

o Feedlots.

o Emerging sector.

o Export markets.


New Growth Path -

Improving job creation in economic sectors

(Agricultural value chain)

DAFF:


(Growth in food production value chain)

OBP:


(Growth + Innovation)

OBP:



OBP’s role in the economy – Investment in Manufacturing infrastructure

o Sustainability of OBP – GMP compliance:

o Act 36 – plans to use GMP as a system of ensuring product quality, safety and efficacy.

o Access to lucrative export markets.

o Local manufacturing: o Preserve primary and secondary job

opportunities.

o Create new job opportunities to support growth.

o Exports – contribute to a positive trade balance.

o Strategy:

o Plant recapitalisation: short-term

o GMP plant upgrade: medium to long term.


New Growth Path -

Improving job creation in economic sectors

(Manufacturing – IPAP2)

DAFF:

Strategic Goal 5

(Investment, Growth and Market access

OBP:


(Sustainable infrastructure investment – Recapitalisation &

GMP)

OBP:



Recapitalisation & GMP Upgrade

o Recapitalisation:

o Replacement of old critical equipment to ensure security of vaccine supply.

o GMP Project:

o Growth strategy into key export markets.

o Process –

o “As Is analysis” – Review previous GMP reports, Quality system, Portfolio, Opportunities.

o Project Approach.

o Pre-feasibility study.

o Propose sustainable funding models.

o Approval from Management, Board & Executive Authority by Sept 2011.


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

Recapitalisation of current manufacturing facility R48.3m R42.0m R29.8m R120.1m

The role OBP in the economy – R&D to drive the Knowledge economy

o OBP a global leader in application of biotechnology to bring to market tropical disease vaccines - 40 yrs.

o Industry is driven by innovation.

o Strategy:

o Increase internal R&D funding:

o Inputs – 10% of revenue

o Outputs – 6 new products in the next 3 years.

o Leverage South Africa’s research capacity, investments and outputs towards commercially viable IP and products.

o Partner globally for technologies enabling competitiveness and growth.


New Growth Path -

Seizing the potential of new economies

(Knowledge economy – IPAP2)

DAFF:

Strategic Goal 5

(Research leadership and Support)

OBP:

Strategic Thrusts 1, 2, 6

(Growth, Innovation - R&D)

OBP:


(Core competence, unique strains, products, know-how)

OBP’s role in the economy – Skills Development

o To ensure access to scientific knowledge

o To ensure that the war over animal diseases is won

o To ensure food safety and security

o To alleviate poverty

o Strategy:

o Improve internal human capital development funding:

o Target – 1% of revenue.

o Learnership programme:

o Targets – 30 in 3 years.

o Internship programme:

o Targets – 30 in 3 years.


MTSF Outcome 5 -

Skilled and capable workforce to support an inclusive growth path

DAFF:


(Transformation through skills development)

OBP:

Strategic Thrusts 6 & 7

(Skills development & Innovation)

OBP:

Strategic Objective 1 & 3

(HCD, Innovation and performance culture)

The role OBP in the economy – Rural Economic Development o A significant number of livestock ownership

in rural communities: unexplored wealth.

o Economic Opportunity – close the local supply gap in meat and livestock products.

o Strategy:

o Information sharing & training sessions to rural farmers through provincial departments of Agriculture.

o Rural distribution points in rural – job opportunities.


MTSF Outcome 7 -

Vibrant, equitable, sustainable rural communities contributing towards

food security for all

DAFF:

Strategic Goals 1, 4 & 5

(Equitable participation of emerging sector in mainstream economy)

OBP:


(Improved access of technical support and vaccines to the emerging sector)

OBP:

Strategic Objective 2 & 3

(Sustainable support of emerging sector through innovation:

products, vaccine costs)


Targets Strategic Objectives Measurements Year 1 Year 2 Year 3 Responsibility

Fin

anci

al

Per

spec

tive

Sales volume growth % increase in unit sales 10% 10% 10% Business Development Officer

Sales Revenue growth Increase in sales revenue R130m R143m R157m Business Development Officer

Gross profit margins % GP 64% 64% 68% Chief Operations Officer

% Operating profit % Operating profit 10% 10% 15% EXCO

Cost reduction on operational

expenses % reduction 5% 5% 5% EXCO

Cu

sto

mer

Per

spec

tive

Industry leading service delivery

to stakeholders Customer satisfaction survey

10% improvement

on baseline Not measured

10% improvement

on Yr. 1

Business Development Officer

Build the OBP Ltd brand. Market awareness survey Establish baseline 15% increase 20% increase Business Development Officer

Develop partnerships with

provincial governments.

No. of provinces where OBP is

the preferred supplier 3 3 0

Business Development Officer

Inte

rnal

Pro

cess

es

Per

spec

tive

New and improved products

development.

No. of new & improved

products developed on

schedule.

1 2 1 Chief Scientific Officer

Improvement of quality

management systems

% of QC methods complying

to ISO 17025

20% of the

schedule

50% of the

schedule

100% of the

schedule Quality Executive

On-time delivery of forecasted

products

% of actual production versus

forecast met 85% 85% 85% Chief Operations Officer

Efficient Production and cost

management.

Meet cost of sales and

operational expenses target

(%).

95% 95% 95% Chief Operational Officer

Improve the management &

flow of information. Implementation of ERP system Finance, HR, EMU Quality Production Chief Financial Officer

Proactive and timely response

to operational and risk matters.

Effective strategic, operational

and tactical meetings Quarterly Quarterly Quarterly EXCO

Lea

rnin

g an

d

Gro

wth

Per

spec

tive

Align employee’s performance

to set objectives.

Performance agreements

signed by 30 April each FY. 90% by April 95% by April 100% by April HR Executive

GMP project plan Approval by Board and

Executive Authority Sept 2011

Implementati

on of Phase I - Strategy & Planning

Implement innovations and

best practices benchmarked

against the industry.

No of innovations

implemented. 1 2 4 Strategy & Planning

Financial Projections - summary

• 10% growth in vaccine usage expected – conservative

• Top 18 products as a minimum to be available up to forecast + risk

• Direct product cost below 40% of turnover – industry norm is 40%

• 5% Cost reduction or maintenance of current levels

• Ensure operational efficiency to generate sufficient cash from operations


INDUSTRY

NORM2009/10 2010/11 2011/12 2012/13 2013/14

R'000

Sales 100 042 145 000 130 460 143 506 157 857

GP MARGIN % 60% 54% 60% 64% 64% 68%

Operating Profit 16% 20% 10% 15% 20%

Research & Development ≥10% 2% 2% 7% 7% 7%

2 007 2 655 9 422 10 364 11 401

Cash Generated from

Operations 19 236 30 000 25 127 20 471 37 041

Financial Projections – Income statement


ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDIncome Statement for the year ended 31 March

2011/12 2012/13 2013/14

R'000 R'000 R'000

Revenue 130 460 143 506 157 857

Cost of Sales 44 356 48 792 53 671

Gross profit 86 104 94 714 104 185

Other operating income 666 1 624 1 844

Administrative expenses 46 665 50 971 56 288

Other operating expenses 33 456 36 802 40 482

Operating profit 6 648 8 565 9 259

Interest received 6 352 1 300 1 430

Profit before tax 13 000 9 865 10 689

Taxation 3 640 2 762 2 993

Net profit for the year 9 360 7 103 7 696

Financial Projections – Balance Sheet


ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDBalance Sheet at 31 March

2011/12 2012/13 2013/14

R'000 R'000 R'000

Assets

Non-current assets

Property, plant and equipment 50 492 50 640 56 717

Deferred tax

50 492 50 640 56 717

Current assets

Inventories 28 672 25 672 27 672

Trade and other receivables 6 964 6 364 5 564

Cash and cash equivalents 174 407 224 407 284 407

210 043 256 443 317 643

Total assets 260 535 307 083 374 360

260 535 307 083 374 360

Equity and liability

Share capital 20 482 59 195 118 413

Retained earnings 228 109 236 674 245 933

Capital and reserves 248 591 295 869 364 346

Trade and other payables 9 301 8 801 8 001

Provisions 2 643 2 413 2 013

Current liabilities 11 944 11 214 10 014

Total equity and liabilities 260 535 307 083 374 360

Financial Projections – Cash Flow Statement


ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDCash Flow statement for the year ended 31 March

2011/12 2012/13 2013/14

R'000 R'000 R'000

Cash flow from operating activities

Cash Receipts 135 976 151 042 167 170

Cash paid to suppliers and employees 110 849 130 571 130 128

Cash generated from operations 25 127 20 471 37 041

Interest received 6 352 1 300 1 430

Dividends received

Taxation paid - - -

Net cash inflow from operating activities 31 479 21 771 38 471

31 479 18 389 28 772

- 3 382 9 699

Cash outflow from investing activities

Purchase of property, plant and equipment 1 935 11 142 18 390

Net cash outflow from investing activities 1 935 11 142 18 390

Cash flow from financing activities

Issue of share capital - ordinary 12 038 39 371 39 919

Net cash inflow from financing activities 12 038 39 371 39 919

Net increase in cash and cash equivalents 41 582 50 000 60 000

Cash and cash equivalents at beginning of year 132 825 174 407 224 407

Cash and cash equivalents at end of year 174 407 224 407 284 407

Performance Monitoring

o Effective implementation of strategy.

o Impact of strategic initiatives –

o Achievement of KPI’s.

o Strategic goals.

o Sustainability.

o Use experience in annual reviews.

o Balanced Scorecard:

o Alignment to organisational strategy.

o Basis for individual performance

contracts.

o Quarterly performance monitoring.

o Annual performance reporting:

o Treasury regulations – Auditor

General.

o Pre-determined objectives.


Conclusion o At an operational level OBP has stabilised:

o Growing revenue and operating profits.

o Investing profits in:

o Development of new vaccines.

o Replacing critical equipment to maintain manufacturing capacity.

o Emerging sector:

o Support through provincial government.

o Rural vaccine distribution opportunities.

o Skills development prioritised:

o Learnership and Internship programmes.

o Bursaries and development programmes.

o Training budget increased.

o GMP project high priority in 2011/12.



Thank you

| onderstepoort biological products © | march 1,...

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