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
Performance at a glance: Overall Customers, Revenue and Cost of Sales and Capacity What does each axis represent? R 500 000 000 25 Customers R 450 000 000 23 R 400 000 000 20 R 350 000 000 18 R 300 000 000 15 Growth of the customer base from 18 to 23 as at R 250 000 000 14 March 2016 R 200 000 000 10 11 R 150 000 000 9 R 100 000 000 5 R 50 000 000 4 1 1 R 0 0 Revenue 2009 2010 2011 2012 2013 2014 2015 2016 Customers Revenue Cost of Sales Steady growth in year on year revenue from R366m to R451 which bodes well for placing the Company Fibre on a sustainable trajectory. Province POP STM-1 equivalents (Km) 2 000 Eastern Cape 19 1799 1 800 Free State 17 1471 2011 1 600 Kwazulu Natal 21 2354 Cost of Sales 1 400 1 514 Limpopo 11 883 1 200 1 000 Mpumalanga 15 1422 1 097 Broadband Infraco is realising the benefit of 800 943 North West 9 940 migrating new customers onto its own infrastructure; 600 Northern Cape 27 2499 thereby reducing lease costs from third parties. The 400 Gauteng 17 1407 200 Company is also optimising its colocation; metro- 0 Western Cape 20 1887 lease and maintenance cost inputs continuously. 2012/2013 2013/14 2014/15 2015/16 Totals 156 14661 Slide 4
Performance at a glance: Procurement Annual Procument Spend 350 Millions 291 300 250 200 2014/15 133 150 112 2015/16 101 100 58 49 41 37 50 13 12 - Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Annual B-BBEE Spend 330 350 Millions 291 300 250 200 2014/15 151 133 150 2015/16 103 100 72 33 32 50 8 8 1 0 - BBBEE Spend BBBEE Multiplier BOE BWO PWD BYO Slide 5
Performance at a glance: Irregular Expenditure Incurred and Identified in the Current Year 151,176 140,000 120,000 100,000 Amount (R'000) The new SCM Policy 80,000 implemented 60,000 40,000 20,000 5,609 3,925 ,345 ,118 - - 2011 2012 2013 2014 2015 2016 Financial Year Irregular Expenditure Slide 6
Performance at a glance: External Audit Finding Category Department Total number of Total number of Total number of findings findings findings 2013/14 2014/15 2015/16 Finance 1 1 Going Concern (Repeat) 3 4 Compliance Commitments; Provisions 5 3 and Revenue Property Plant and 6 6 Equipment (Repeat ) 1 Trade and other payables Irregular, fruitless and 3 wasteful expenditure Relates to 8 SCM Compliance stretched targets determined in the 2 nd quarter of the 3 HRM Compliance year Compliance :Performance 5 2 CEO OFFICE* Information 1 1 1 Shareholder Compliance (Repeat ) (MOI) 1 Sales & Marketing Revenue 28 19 8 Total *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 Slide 7
Governance: Status of the drivers of internal control Financial and Performance Governance Leadership Management Effective leadership Proper record keeping Proper record keeping culture Processing and Proper record keeping Oversight responsibility reconciling controls Proper record keeping HR Management Regular reporting Policies and Procedures Compliance Monitoring Improved Audit Action Plans IT System Controls Unchanged Regressed IT Governance Slide 8
The turnaround strategy (BGE) as a driver of performance 2013/14 2014/15 2015/16 APP Achievements 89.47% of the 83% of the 87.50% of the Shareholder Compact Shareholder Compact 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 2014 restated as Irregular Expenditure R6 535 000 R38 000 Zero irregular 926K was identified during the expenditure erroneously year classified as irregular Overall award and “A” Awards NOSA Accreditation in compliance, internal and ISO 18001 audit and internal successful audit control Audit Opinion Unqualified audit report Unqualified audit report Unqualified audit report Slide 9
Integrated Reporting Highlights Economic Environment Social Customer- centric Slide 10
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 Financial Sustainability Network Performance Rebates ≤3% of customer revenue 0.10% as percentage of gross revenue Percentage increase of actual revenue 28% increase in revenue 24% 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 Network Saleability Overall increase in capacity at STM-1 160STM-1 497 STM-1 Equivalent Network Improvement 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 Slide 12
Shareholder Compact Achievements Key Performance Indicator Target Achieved Results Number of Points of Presence 5 PoPs 33 PoPs optimised optimised Economic Transformation Training spend as percentage of payroll 1% 1.33% Maximise socio-economic contributions Increase in number of direct jobs 40 indirect jobs 686 indirect jobs created Allocation of BBBEE budget discretionary 70% 114% spend Percentage increase on BOE spend 40% of BBBEE 54.1% Percentage spend of YOE 10% of 40% spend 10.7% on BOE Percentage spend on BWO 10% of 40% spend 44.5% on BOE Percentage increase spend on PWDOE 1% 0.1% Number of digital learning tools 60 tablets 60 procured and delivered 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 10% 12% (17.6%) excluding depreciation Overall increase in capacity at STM-1 at 160 668 497 STM-1 Equivalent Number of KM of fibre added to the 100km 250 km 420.05km Network To drive optimal cash management the following KPI’s were added Number of days per outstanding 45 days plus 15 26 days customer invoices days per contract Unallocated Number of days for unallocated Allocated within creditors less creditors a week than a week To drive actual project delivery the following KPI replaced the number of projects delivered KPI Number of points of presence 41 POP’s 33 POPs optimised to facilitate customer optimised optimised connection points 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 Audited Audited Audited Audited Audited R’m March Restated March March March 2012 March 2014 2015 2016 Revenue increased by 24% to 2013* R452 million. Revenue 394 237 302 366 452 Cost of sales decreased by 18% Cost of sales (276) (172) (153) (314) (260) to R260 million. Gross profit 118 65 149 51 192 Operating costs decreased by 6% to R292 million. Operating expenses (258) (262) (312) (311) (292) Results from operations (140) (197) (163) (260) (100) Operating loss decreased from R245 million to R91 million. Finance income 54 22 20 15 9 Finance costs (9) 0 0 (2) - Profit/ (Loss) * Review of useful life R6.7m restatement before taxation (95) (175) (143) (245) (91) of depreciation Income tax expense - - - - - Profit/ (Loss) for the year (95) (175) (143) (245) (91) EBIDTA (27) (81) (36) (145) 30 Slide 16
Revenue and Cost of Sales Revenue R'm 452 394 366 302 237 2012 2013 2014 2015 2016 Lower cost of sales, mainly due to: Revenue increase resulted from: Lower fibre lease and maintenance costs due to favourable negotiations with Additional revenue from key customers; suppliers; New contracts (from new customers) Continual drive to optimise costs; concluded during the year; and Optimal designs; and Vigilant oversight on all financial outlays. Retention of existing customers Slide 17
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