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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
ConclusionSlide 2
Table of Content
Performance at a glance
Annual Performance Plan
Financial Performance
Project delivery and Service Performance
HR Performance
Risks
ConclusionSlide 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
on a sustainable trajectory.
Broadband Infraco is realising the benefit of
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
9431 097
1 514
2011
0
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
0
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
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Customers Revenue Cost of Sales
Province POPFibre
(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
-
50
100
150
200
250
300
350
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Mill
ion
s
Annual Procument Spend
2014/15
2015/16
291
330
103
33
1 8
133 151
72
32
0 8
-
50
100
150
200
250
300
350
BBBEE Spend BBBEE Multiplier BOE BWO PWD BYO
Mill
ion
s
Annual B-BBEE Spend
2014/15
2015/16
Slide 5
151,176
3,925 ,345
5,609
,118 - -
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2011 2012 2013 2014 2015 2016
Am
ou
nt
(R'0
00)
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
FinanceGoing Concern (Repeat) 1 1
Compliance 3 4
Commitments; Provisions
and Revenue5 3
Property Plant and
Equipment (Repeat)6 6
Trade and other payables 1
Irregular, fruitless and
wasteful expenditure3
SCM Compliance 8
HRM Compliance 3
CEO OFFICE*
Compliance :Performance
Information2 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
ManagementGovernance
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
on 19 September
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- centricSocial
Table of Content
Performance at a glance
Annual Performance Plan
Financial Performance
Project delivery and Service Performance
HR Performance
Risks
ConclusionSlide 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%
on BOE
Percentage spend on BWO 10% of 40% spend 44.5%
on BOE
Economic Transformation
Number of digital learning tools 60 tablets 60 procured and
delivered
Number of Points of Presence 5 PoPs 33 PoPs optimised
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 depreciation10% 12% (17.6%)
Overall increase in capacity at STM-1 at
STM-1 Equivalent160 668 497
Number of KM of fibre added to the
Network100km 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 contract26 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
optimised to facilitate customer
connection points
41 POP’s
optimised
33 POPs
optimised
Slide 14
Table of Content
Performance at a glance
Annual Performance Plan
Financial Performance
Project delivery and Service Performance
HR Performance
Risks
ConclusionSlide 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
operations (140) (197) (163) (260) (100)
Finance income 54 22 20 15 9
Finance costs (9) 0 0 (2) -
Profit/ (Loss)
before taxation (95) (175) (143) (245) (91)
Income tax expense - - - - -
Profit/ (Loss) for
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
of depreciation
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
RevenueR'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
Increase in asset base due to completed
projects that increased depreciation
Useful life review resulted in depreciation
reduction in previous year
Reduction in costs due to natural attrition of
employees
Performance incentive paid for 2013: R8 mil
168144
170
8086
102
115
103
5
7
7
6
78
2012 2013 2014 2015 2016
Employee ExpensesR'm
salaries directors Bonus
163144
180185
151
110
115
123
115
130
2012 2013 2014 2015 2016
Depreciation and AmortisationR'm
Slide 18
Financial Position
1190 12191476 1338 1368
64 48
175 257 49442 343
442157 141
2012 2013 2014 2015 2016
AssetsR'm
Equipment Accounts Receivable Cash
15221348 1208
964 873
10394
610
617575
71
168
275
171110
2012 2013 2014 2015 2016
Equity and LiabilitiesR'm
Equity Deferred Income Current Liabilities
Slide 19
Cash Flow Position
442
343
442
157 141
2012 2013 2014 2015 2016
Cash and Cash EquivalentsR'm
69 10
329
-137
137
2012 2013 2014 2015 2016
Cash from operationsR'm
155144
199
148161
2012 2013 2014 2015 2016
Cash used in investing activities
R'm
0
34
-31
0 0
2012 2013 2014 2015 2016
Cash from financing activitiesR'm
Slide 20
Table of Content
Performance at a glance
Annual Performance Plan
Financial Performance
Infrastructure delivery and Service Performance
HR Performance
Risks
ConclusionSlide 21
2015/16 Infrastructure Rollout Performance
ProvinceFibre 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 0 100% 4 0 100%
Limpopo 69.3 0 100% 3 0 100%
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 0 100% 8 0 100%
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
100,00100,0099,95100,00100,00100,00
98,58
100,0099,90100,00100,0099,79
100,0099,82 99,77
100,00100,00100,00
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 AverageServicePerformance
HighestContractedSLA
Table of Content
Performance at a glance
Annual Performance Plan
Financial Performance
Infrastructure delivery and Service Performance
HR Performance
Risks
ConclusionSlide 25
0
5
10
15
20
25
0
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
Management77 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
ConclusionSlide 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
implemented. Points of presence were
optimised to obtain network autonomy
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
ConclusionSlide 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
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