Embracing Opportunities. Presentation to Portfolio Committee on Telecommunications & Postal Services QUARTER

Transcription

1 Embracing Opportunities Presentation to Portfolio Committee on Telecommunications & Postal Services QUARTER BMC Ngcobo Chairperson of the Board

2 Legislative Mandate of Broadband Infraco NDP A South Africa that has resumed its rightful place on the global stage - with an e-literate, economically active population fully able to access and utilize appropriate content and services to enhance quality of life. Broadband Infraco s purpose is in line with the NDP for establishing national, regional and municipal fibre-optic network to provide the backbone for broadband access. Broadband Infraco operates on the premise that national backhaul, provincial backhaul and districts backhaul require state intervention, thus allowing private investment to lead the way in the access market. SA Connect Broadband Infraco s roll-out of long distance backhaul fibre to underserviced areas will enable provincial governments to leverage such broadband infrastructure and services for economic growth, job creation initiatives and poverty reduction efforts. BBI Mandate Act 33 of 2007 The main objects as set out in the Act are to expand the availability and affordability of access to electronic communications; Including but not limited to under developed and under serviced areas; In support of projects of National Interests; In accordance with the Electronic Communications Act and commensurate with international best practice and pricing; Through the provision of electronic communications network services and electronic communications services. Outcome 1 Outcome 2 Outcome 4 Outcome 5 Outcome 6 MTSF Outcomes Quality basic education A long and healthy life for all Decent employment through inclusive economic growth Skilled and capable workforce to support an inclusive growth path An efficient, competitive and responsive economic infrastructure network SIP 15: Sub-outcome 5 Expansion, modernisation, access and affordability of our Information and communication infrastructure 9 point Plan Applicable to broadband roll-out. Nr. 7. Unlocking potential of SMME s; Cooperatives; townships and rural enterprises. Nr. 8 Reform & boosting of the role of SOE s ICT or broadband infrastructure rollout. Broadband Policy Target International Measurements Broadband access in Mbps user experience 100% at 10Mbps by 2030 WEF Ranking = 65 (75: 2015) Slide 2

3 Quarter 2 Performance Results Strategic Objective KPA KPI Baseline SO 1: Develop an integrated packet transport network that encompasses growth/expansion, technology evolution Network performance management Financial Network performance rebates paid as percentage of gross revenue Actual Time to Restore Core Network Faults 0.10% 2017/18 Target 0.2% of gross revenue Q2 Targets Q1 Results Q2 Results Status Comments 0.2% of quarterly gross revenue 0.16% of quarterly gross revenue 0.16% Achieved 8hrs 7.5hrs 7.5hrs 6.04 hrs hrs. Achieved Average Percentage New service availability 98% 98% 99.83% 99.81% Achieved per month Increase Revenue by R89.2 million (48.8 million) R89.2 million R22.1 million -R28.3 million (R6.1 million) Not Achieved Due to failures on the spur or unprotected links Revenue is behind target mainly due to the delayed sales to billing cycle. Management added capacity in the Sales team, which resulted in new sales. SO 2: Ensure long-term business Sustainability Current Ratio 93% 115% 178% 153% 136% Not Achieved Current ratio positive but less than target due to lower cash and cash equivalents than predicted Increase amount of EBITDA annually R33.8 million R116 million R23.9 million R9.2 million R9.6 million Not Achieved EBITDA remained positive but less than target. Target not met due to revenue target not being met. Number of days per outstanding customer invoice 45 days 45 days 45 days 54 days 62 days Not Achieved This is mainly due to slow payments being received from two major customers. Slide 3

4 Quarter 2 Performance Results Strategic Objective KPA KPI Baseline 2017/18 Target Q2 Targets Q1 Results Q2 Results Status Comments Safety, health and environment Number of small BEE companies trained on OSHA 3 SMMEs 3 SMMEs Identify the SMMEs to be trained 3 SMEs identified 1 SMME trained Achieved Percentage Allocation of BBBEE budget discretionary spend 112% 70% spend of BBBEE 10% spend of BBBEE 117% 103% Achieved SO 3: Drive Socio- Economic Transformation Procurement Percentage increase on black owned entities spend Percentage spend of Black Women Owned entities 39.55% 15.24% 40% spend of BBBEE 10% spend of 40% spend on BOE 5% spend of BBBEE 2% spend of 40% on BOE 37.34% 49.30% Achieved 57.38% 49.38% Achieved Corporate Social Responsibility Cyber Security installed at Seshigo High school ZERO Seshigo High School Computer laboratory secured Develop a cyber-security Strategy & Implementation Plan None IT department requested to assist in the installation of the cybersecurity. Not Achieved Plans have been put in place to install cyber security with the assistance of the internal IT department SO 5: Build high performance organisation Human Resources Capacity Building Training spend as percentage of payroll % of Technical Intern qualified for P1 and P2 1.55% ZERO 1% of the wage bill spend on Targeted training and development by end of year 70% of Technical Interns completed P1 and P2 Compile Workplace Skills Plan and Annual training report Review of first 6 months and submission of reports and PoEs Training spent at 0.5 of payroll Report to MICT SETA and formal development 0.94% of the wage spent on training MICT Seta conducted assessments and approved payment Achieved Achieved Training spent at 0.25 of payroll Development and on the job training continues Slide 4

5 Total Fibre and PoP per Province: Outcome 6 Province POP Fibre(Km) Eastern Cape Free State Kwa - Zulu Natal Limpopo Mpumalanga North West Northern Cape Gauteng Western Cape Totals Slide 5

6 Financial Position Year to Date Year to date Previous year Audited 30-Sep Sep Mar-17 Actual Budget Actual R'000 R'000 R'000 Assets Non-current assets 1,212,234 1,310,739 1,278,634 Property, plant and equipment 1,191,518 1,299,649 1,257,364 Long term Receivables 8,940-8,930 Deferred Expenses 11,776 11,090 12,340 Current assets 109, , ,512 Inventories Cash and cash equivalents 33,837 38,690 35,515 Short term portion of deferred expense 1,139 1,139 1,139 Trade and other receivables 74,709 74,618 79,857 Total assets 1,321,918 1,425,186 1,395,146 Equity and liabilities Equity attributable to owners of the parent 697, , ,008 Share capital Shareholders' loan - DTPS 1,351,130 1,351,130 1,351,130 Shareholders' loan - IDC 478, , ,400 Retained earnings (1,132,047) (1,102,235) (1,079,522) Non-current liabilities 485, , ,763 Interest-bearing debt / long term loans 43, ,865 52,420 Deferred revenue 442, , ,343 Current liabilities 138, , ,376 Trade and other payables 77,628 76,176 77,372 Current portion of deferred revenue 58,145 63,589 58,145 South Africa Revenue Services - PAYE and VAT 2,848 3,207 2,859 Assets increased by R 4 million for the quarter, totalling R7 million for the YTD. Assets below budget due to reduced spend in quarter. Remained cash positive throughout quarter. Deferred revenue is not payable. Debtor days increased to 62 days and collections should improved during next quarter. No debt raised during this quarter. Total liabilities 624, , ,139 Total equity and liabilities 1,321,918 1,425,186 1,395,146 Slide 6

7 Financial Performance Continuing operations Sep-17 Sep-17 Mar-17 Audited YTD YTD Year end Actual Budget Utilised Prev Year R'000 R'000 % R'000 Total revenue 191, ,835 77% 397,184 Anchor Customers 125, ,215 87% 277,695 National Revenue 32,733 65,667 50% 56,969 WACS 32,888 36,953 89% 62,520 Year on Year Growth -6.1% Cost of Sales excluding depreciation 98, ,345 98% 222,241 Cost of Sales 165, ,625 96% 372,939 Year on Year Growth -19.1% Gross Profit 26,201 76,210 34% 24,245 Gross Profit 13.7% 30.8% 6.1% Other income - - 1,092 Operating expenses 80,343 99,279 81% 153,801 Results from operating activities (54,142) (23,069) 235% (128,464) Finance income 1, ,029 Finance charges and fair value movements 317 (4,597) (1,983) Profit/(loss) before taxation (52,524) (27,461) 191% (124,419) Taxation Profit/(loss) for the year (52,524) (27,461) 191% (124,419) EBITDA 18,504 53,657 34% 35,309 Employee Cost as % Revenue 28.0% 23.6% 25.2% Revenue below budget. New sales strategy implemented and starting to bear fruit. Cost of sales items renegotiated and overall contracted cost savings. Operating expenses below budget as result of good management of cost containment and phasing. EBITDA remained positive. Slide 7

8 Statement of Cash Flow Year to Date Year to Date Previous year Actual Budget Actual - Audited 30-Sep Sep Mar-17 R'000 R'000 R'000 Cash flows from operations 12,278 (11,369) (101,111) Cash flows from operating activities 1,617 (4,392) 4,046 Finance income received 1, ,029 Impairment of fixed assets Unrealised foreign exchange gain/ (loss) difference reversed Finance charges paid 317 (4,597) (1,983) Taxation paid Cash (used in)/ generated from operations 13,896 (15,761) (97,065) Cash flows from investing activities (6,800) (80,654) (61,464) Proceeds on disposal of property, plant and equipment and intangible assets Additions to property, plant and equipment and intangible assets (6,800) (80,654) (61,464) Additions to other investments Cash flows from financing activities (8,772) 103,337 52,420 Shareholders'loan received Loans (repaid) received (8,772) 110,257 52,420 Finance lease capital repaid - (6,920) - Increase in net financial assets Net increase/(decrease) in cash and cash equivalents (1,676) 6,922 (106,109) Net cash and cash equivalents at beginning of year 35,515 31, ,624 Net cash and cash equivalents at end of year 33,839 38,690 35,515 Slide 8

9 Funding Update Mechanism Elaboration The Company is continuing to drive sales, optimise costs and manage assets optimally (cash and working capital management). Funding Context The DBSA and IDC have been approached to fund the deployment of infrastructure for specific projects. Shareholder is being engaged to convert the shareholder loans to equity. Funding required for Working Capital. Funding efforts The IDC is being re-engaged for funding on a commercial basis. Possible Vendor Financing options are being considered. Slide 9

10 External Audits and Irregular Expenditure Departme nt Finding Category Total number of findings 2014/15 Total number of findings 2015/16 Total number of findings 2016/ R 000 R 000 R 000 R 000 R 000 Finance Going Concern (Repeat) Compliance Commitments; Provisions and Revenue, Financial Classifications Opening balance Incurred and identified in the current year Property Plant and Equipment Trade and other payables Identified in the current year relating to previous years 377 (377 ) Irregular, fruitless and wasteful expenditure 3 Removed from the register* (926) (1 555) SCM Compliance Condoned during the year (73 454) (396 ) ( ) (372) (275) HRM CEO OFFICE Compliance Compliance :Performance Information 5 5 Amount not condoned carried over** Shareholder Sales & Marketing Total Compliance (Repeat) (MOI) Revenue (Repeat) * Reversed No irregular expenditure recorded in Quarter 2 All tenders are audited before award Slide 10

11 Top 10 Strategic Risks No. Vulnerability (Risk description) 1 Likelihood not to continue as a going concern 2 Regulatory constraints impeding organisational agility. Mitigation/ Preventative Actions 1. a. The sales reporting lines were changed in the second quarter of the financial year. New sales operations processes were implemented in quarter 3 which resulted in some traction of new sales in quarter 4. Consequence management has also been implemented in the Sales environment. Sales staff is compacted to deliver against expressed quarterly and annual billable revenue as part of driving high performance. b. Provisioning of all contracted service is monitored and tracked at EXCO level (in addition to SPRC) to unblock any impediments. KAMs are actively completing proposals to existing and new customers to extend contracts for longer periods and reduced rates. 2. a. Key supplier contracts have been negotiated and resulted in sustainable, long term cost savings. All contract that are to be renewed will be subjected to the same scrutiny. b. Management continues to monitor, reconcile and manage cash flow on a weekly basis.. 3. a. During the third quarter of the previous financial year Broadband Infraco secured a line of credit to the value of R45 million to fund specific network technology refurbishment. The funding provider has since withdrawn their commitment and the Company, together with the term sheet giver, are diligently trying to source an alternative funder. 3. b. The Company also continue with sourcing funding from other Commercial Banks, Developmental Institutions and specific vendors to further contribute to the sustainability of the company. 1. Continues to drive the optimisation of the long term demand plan and strategic sourcing to reduce the turnaround time of bids. 2. Shareholders were requested to increase the borrowing limits as the companies is readying itself for the implementation of SA Connect Phase Continue to plan to play a leading role as SOC infrastructure integrator. 3 Margin pressure 1. Sales and Marketing Strategy is currently being reviewed identifying critical market shifts; demand patterns; industry consolidation; pricing trends and how best the Company needs to respond to these market forces. 2. Key supplier contracts have been negotiated and resulted in sustainable, long term cost savings. All contract that are to be renewed will be subjected to the same scrutiny. 4 The impact of Non ICT SOC's on the cost to communicate 1. Continuous Engagement with the DTPS. 2. The company continues to Engage and partner with the Non ICT SOCs on various projects. Slide 11

12 Top 10 Strategic Risks No. Vulnerability (Risk description) 5. Lack of awareness for new imperatives in privacy and security of information Mitigation/ Preventative Actions 1. We have utilised the co-source personnel to assist with the security concerns. Process for cyber security experts in progress. 2. Mimecast application is being used to assist with cyber security backups. 3. Knowledge sharing is happening in the IT environment. 6 Difficulty to raise funds 1. Continue interactions with suppliers to extend credit terms and to source funding for working capital, ring fenced projects and selective maintenance projects. 2. Continue with renewed intensity on sourcing funding from commercial banks, developmental institutions. 3. Engagement with DTPS with regards to conversion of subordinated loans into equity continues. 7 Damage to the reputation of Broadband Infraco 8 Limitations in resolving fulfilment value chain 9 Market consolidation resulting in a changed market structure. 10 Difficulty to retain and attract the required skills while appropriately managing the cost to revenue ratio. 1. Continue to build relationships with the media and harmonies communication with shareholders resulting in Positive image created by the Minister of DTPS who alluded to the Company's sterling performance and relevance in the ICT industry going forward. 2. Key Suppliers contracts were finalised in Quarter 1 resulting in reduction in cost of sales. 1. Project re-sizing has been done and currently being monitored by CPM. 2. Project Management methodology has been embedded in business processes. 1. The monitoring and tracking of Market Trends is taking place and has resulted in some cases in good wins for BBI (Vodacom, MTN etc. via CMSO). 2. The CTO to CTO engagements are going on well (PRASA, Neotel, etc.). 1. Internship was extended to support environment at Company cost and the positions that had been filled on a temporary basis are being made permanent. 2. A bilateral meeting between the leaderships of BBI and CWU took continued during the quarter under review. 3. Redeployment of candidates have mostly been confirmed to the positions rotated to after sufficient exposure and upskilling. The strategy of identifying and enhancing skills from within works well. Slide 12

13 Procurement Overview: Outcome 4 SCM Performance Compact Verification Compact BBI BBBEE Scorecard Areas Total Procurement Spend Target/s Actual % B-BBEE Spend R 17,468, B-BBEE Multiplier R 18,075, % 103% BOE R 8,611, % 49.30% BWO R 4,252, % 49.38% Value Adding R 13,979, % 80.03% Generic R 9,940, N/A 56.90% QSE R 1,707, % 9.78% EME R 4,021, % 23.02% > 51% Black Owned R 5,911, % 34% > 30% Black Women Owned R 10,171, % 58% The BBBEE multiplier scorecard achieved in this quarter is 103% against ICT sector code target of 70%; and Black Owned Entities (BOE), and Black Women Owned entities are at 49,4% and 80,0% respectively both targets achieved this quarter. A focused effort has been put in place to improve on the targets not achieved in Q2 Slide 13

14 Employee Profile: Outcome 5 EMPLOYMENT EQUITY DEMOGRAPHICS ( inclusive of interns) Job Levels Male Female Foreign Nationals Sub Totals Total A C I W A C I W M F M F Executives Senior Management Professional Specialist & Middle Management Supervisory & Junior Management Operational Support Total Permanent and Fixed Term contracts (Excl Interns) % 0% 17% 17% 33% 0% 0% 0% 17% 0% 67% 33% 100% % 0% 0% 17% 33% 0% 8% 8% 8% 0% 50% 50% 100% % 3% 5% 10% 33% 0% 0% 0% 0% 0% 68% 33% 100% % 0% 0% 6% 12% 0% 0% 0% 0% 0% 88% 12% 100% % 0% 2% 4% 42% 0% 0% 2% 2% 0% 56% 44% 100% % 0% 0% 0% 63% 0% 0% 13% 0% 0% 25% 75% 100% % 1% 3% 7% 36% 0% 1% 2% 2% 0% 61% 39% 100% Interns Total Permanent Temporary workers GRAND TOTAL Total Gender split Female38% Male 62% Slide 14

15 Thank You Slide 15