2015/2016 APP Presentation to Portfolio Committee · Proclamations Presidential Proclamation signed...

$: 2015/2016 APP Presentation to Portfolio Committee · Proclamations Presidential Proclamation signed on 19 September 2014, effectively transferring Broadband Infraco from the Department$
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





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




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





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





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




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





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





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





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

2015/2016 APP Presentation to Portfolio Committee · Proclamations Presidential Proclamation signed...

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