/
Parliamentary  Select  Committee Parliamentary  Select  Committee

Parliamentary Select Committee - PowerPoint Presentation

faustina-dinatale
faustina-dinatale . @faustina-dinatale
Follow
381 views
Uploaded On 2018-03-13

Parliamentary Select Committee - PPT Presentation

June 2017 Revenue was almost flat from the prior year with a R 96m variance in line with 08 GDP growth in the economy Monthly revenue shortfall of approx R100m to meet operating costs approximately R70m per month is spent by SAPO subsidizing the USO and public service mandate ID: 649338

2017 sapo postbank revenue sapo 2017 revenue postbank year government mail financial services 2016 company section commerce current capital

Share:

Link:

Embed:

Download Presentation from below link

Download Presentation The PPT/PDF document "Parliamentary Select Committee" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.


Presentation Transcript

Slide1

Parliamentary

Select

Committee

June

2017Slide2

Revenue was almost flat from the prior year, with a R 96m variance in line with 0.8% GDP growth in the economy.

Monthly revenue shortfall of approx. R100m to meet operating costs (approximately R70m per month is spent by SAPO subsidizing the USO and public service mandate).Debt service costs are high at R301m for the year – the anticipated equity injection from Government is critical to reduce this figure. Interest on loans for a full year amounts to approx. R350m p.a.The consolidated balance available from the term loans is R687m which will only provide liquidity for at most another six months if current monthly loss levels continue.

Performance Review: Financial performance

2

2

Item

2015/16

Actuals

2016/17

Budget

2016/17

Actuals

Budget

Variance

Prior

Year

Change

Revenue

R 4,8bn

R 6,8bn

R 4,7bn

-R 2,1bn

- R 96m

Expenditure

R 5,9bn

R 6,9bn

R 5,9bn

+R 1,1bn

+R 68m

Non-operating Items

-R 6m

-R 1,1bn

-R 198m

+R 856m

-R 192m

Group Net Loss

R 1,11bn

R 1,15bn

R 1,33bn*

-R 186m

-R 220m

*R186m below

budget before year end adjustments. Expected net loss closer to R1.2 billionSlide3

Financial performance

(continued)3

3

The

funding materialised 4 months later than expected and consequently

, the recovery of operations was delayed by six months

A R3,7bn loan facility was finalised, incorporating the prior R1,0bn

facility, however SAPO did not receive the capital injection it requested, which would started to addressed its in appropriate capital structure

Creditors

backlog was settled and the accruals backlog reduced by 90%.

Mail revenue was stabilized with early signs of customer confidence & trust returning to SAPO

. Four of the latter six months 2016 FY saw SAPO’s revenues higher than the same period in the 2015 FY.Slide4

Current Status Overview

4

4

Creditor

outstanding backlog balance for the 2015/16 FY is R124m from the R899m at March 2016. The consolidated balance available from the term loans is R687m.Total STB Installations completed

is 36 999 and registration of

149

145 qualifying recipients at 31

March

2017.

ICASA has approved the 2017/18 Price Cap Tariff Proposal of 9.3%.

The

total staff headcount as at 31 March 2017 has been reduced by 2 052 to 18 729 from 20 781 in March 2016.

Although the Voluntary Separation Package process was disappointing in its take up, it did result in a reduction of headcount by 768 staff.

SAPO continues to

subsidise

USO branches by over R 300m per year.

SAPO’s interest costs are still very high at R 350m per year, due to SAPO’s inappropriate capital structure.Slide5

Post/Mail Business

5

5

Mail

OperationsMail volumes declined by 12% in 2016. Volumes are expected to continue declining as consumers move away from physical post. The declining mail will be substituted with parcels and e-commerce, which is growing at a rate of +- 20% per annum according to a study by World Wide Worx.

15 Mail processing machines were brought back online,

which assisted

in clearing the

backlog at the mail centers

Johannesburg International Mail Center

– I

nternational mail backlogs have been cleared. SAPO has

already been approached by the private sector to look at SAPO being part of their logistics solutions

.

Transport –

l

inehaul

trucks have been converted to closed bodies. This is expected to reduce transport costs by R150m per annum.

Retail Operations

New Retail branch area

managers have been appointed,

The

process of appointing branch managers and eliminating acting

managers

is due to start, which should bring changes in management oversight and service delivery

. Contractors are in the process of being appointed to undertake maintenance and cleaning of branches and bringing them to operational standard

Branch stock

levels have improved

this has translated to an improvement in revenues in the Retail business.

Projects to replace

Pinpads

for card payment at branches

and

roll-out Multifunctional

Printers (MFP

) to the branches have begun.Slide6

Human

Capital Management6

6

A joint settlement agreement with the

recognised trade unions was reached resolving a number of legacy labour issues.CFG staff were absorbed by SAPO on existing terms and conditions of service. A voluntary separation program was implemented resulting in 768 additional employees leaving the organisation during the year.

Regular engagements with trade unions resulted in labour stability.Slide7

Postbank

7

7

Financial performance at preliminary closing at 31 March 2017

Closed the year with strong results. Profit before tax of R249 million exceeding budget by 38%.

Healthy

balance sheet

with total

i

nvestments

of

R7.7bn, up

7

% from prior year

Deposits

from

customers at R5.0bn, up

3%

from prior year.

The total number of accounts increased by 172 359, from 5 558 776 (2016) to 5 731 135 (2017).

Postbank needs the banking license to increase net interest from lending margins, this could significantly increase Return on Assets to industry norms.

A merger with a like-sized bank could dramatically improve the business case for Postbank (bringing on board credit skills, technology, critical mass and experienced management).Slide8

Postbank Corporatisation update

8

8

The Banking Licence application process is governed the

Banks Act and supporting Regulations

There are

3 steps

to be followed in obtaining the licence:

Section 12 an

application to establish a bank.

Postbank has received permission from the SARB in July 2016 to Establish the Bank subject to various conditions that must be complied with

2. Section 15

application to form a company that carries on the business of a bank

.

The South African Postbank SOC Limited company was incorporated and registered on the 19

th

of April 2017.

In terms of Section 16, there are 12 months available to demonstrate compliance in order to be awarded a

banking licence

(section 17). This 12 month period commenced on the 4

th

of July 2016 and the section 16 Application to Register a Bank must be submitted before this deadline. Slide9

Postbank Corporatisation update (continued)

9

9

The

appointment of the Postbank Board by the Minister of Telecommunications and Postal Services in March 2017. These board members were cleared as ‘fit and proper” by the SARB prior to their appointment The incorporation and registration of the “South African Postbank SOC Ltd” company in April 2017The appointment of people in a number of key positions required for the banking license

: Head

of Regulatory Reporting, Head of IT Risk and Compliance and Head of Financial Crime (Anti-Money Laundering). The process in appointing a Compliance Officer, Company Secretary and Head of Treasury is underway

Building a

Project Management capability

within Postbank to drive implementation

Appointed

30 internal resources for implementation

and compliance purposes – About 80% progress achieved on

implementation at end of April 2017

Implementing

a number of systems and processes

required for the banking license. These include the

GoAML

system, an IT

Disaster

Recovery Capability, a regulatory reporting system and

others

Postbank

is ready to operate as a registered bank (as defined in Banks Act) and as a Company per the Companies Act. It is

also on

track to submit its banking license application prior to the deadline of 3 July 2017

.Slide10

Postbank Corporatisation Milestones

10

10

10

Feb 2017

Mar 2017

Apr 2017

May 2017

Jun 2017

July 2017

Aug

2017

Section 16

Submission

Postbank Ltd established

CIPC process

Reserve name (up to 4 names)

Need to inform CIPC of:

Directors (each director must provide a copy of his/her ID

MOI

Postbank Act

Section 13 letter

Auditors

Company Secretary

Minister

to Gazette Transfer Date (will be upon approval of Sec 17)

SAPO must Inform NT

ito

of Sec 51(g) & Sec 54 of PFMA that they intent to establish a company Done: 18 May 2012

*****BCC Section 43 Application

Ministers to agree on Bank Controlling Company option

Letter from Minister on extent of business to be transferred to Postbank

(Approved letter to submit with Section 13)

Ministers to concur on names of Board members

Minister of Telecoms and Postal Services to sign CIPC documentation (must include board member information)

Section 16 audit confirmations required by SARB (independent KPMG team)

Postbank Board induction, finalisation of Cooperation agreement, approval of policies and submission of the applications etc.

Preparation of Transfer Agreement

LEGEND:

GREEN

= DONE

AMBER

= IN PROGRESS

RED

= ISSUE TO BE RESOLVED

Postbank is on the cusp of submitting it’s section 16 Application to Register as a Bank to the South African Reserve Bank (SARB) but there are two intractable issues that need resolution prior to the award of the banking license. These are the

legislative conflict issue

and the

Bank Controlling Company (BCC) issueSlide11

SAPO generated

approximately R 174m from parcels and R 40m revenue from e-Commerce related transactions in 2016 . SAPO intends to generate up to R 1,3bn in revenues from Parcels and e-Commerce by 2020, as the e-Commerce market is growing at a rate of 20%. Parcels will be worth an estimated R 10bn in 2020 and SAPO expects to reach at least 10% of this market. A level of market share which it held previously. SAPO will finalise the business plan for the creation of an e-Commerce company by the end of June.Although there are significant overlaps between parcels, courier and e-commerce businesses, the e-commerce business will require a new leader and different management culture.

External partners will most likely be part of the solution (this will include a necessary injection of capital and new technology)

E-Commerce Business

11Slide12

Customer Interface: Trend Analysis of E-mail Complaints Attended

February- April 201712Customer Interface Update

The Call Center Upgrade project is on track with 2 call centers having been upgraded and the main call center in Pretoria being next in line for upgrade

The e-mail based complaints process is being embedded with complains received reducing from over 3 500 to just over 1 900 by the beginning of April .

An option of outsourcing the management of the call center is being explored to ascertain whether a cost effective solution can be provided by the market.Complaints received via E-mail customer contact serviceSlide13

Planned Q1 Marketing Plan -External

13Focus AreaInitiative

Planned DeliveryCommunication c

hannelsMarchApril

May JuneCurrent CapabilityOngoing operationsNASunday Times monthly adverts, Industry & Government publications monthly adverts26/0330/0407/0504/06

Billboards

05/04 - 14/06

Areas being fixed

Printers

(MFDs)

,

Pinpads

, Point

of Sale terminals upgrade

End April

Radio

Feature, Sunday Times advert, FB Twitter, SAPO Website, online adverts

-

3/05

– 26/05

06/05- 31/05

-

New Product Launches

Online

Payment, online application enablement, e-ticketing, etc.

Monthly

Radio Advert, SAPO Website, FB, Twitter update, press releases, Industry Publications, online adverts

07/05

01/06

Trust

Center

Launch of new certificates

End April

Sunday Times, Radio advert,

Social Media & SAPO Website, online ads

TBA

TBA

Operational Stability

Company Feature (Financial Mail)

May/June

Financial

Mail (including pull-outs), Industry publications

TBA

TBA

Budgets are still required to be

finalized

Cognisance

will be taken of industry marketing spend norms in relation to Turnover

Q1 Marketing Plan- External

The Q1 Marketing Plan is focused on communicating

SAPO’s current capability

Key

areas that are being fixed

New product launches

Operational stabilitySlide14

Inter-Governmental Framework

14SAPO is working on undertaking significant amounts of work based on the Intergovernmental Framework but also based on the principle of Government Agencies and departments collaborating to deliver services to South Africa’s citizens. SAPO is currently pursuing several opportunities in terms of the Framework, such as

SASSAUNISA distribution services

Telkom Department of Health

Department of CommunicationsDepartment of Land AffairsNational Student Financial Aid SchemeIn terms of Section 217c of the Constitution government agencies or departments can engage with each other in provision of services. SAPO will be looking to use this clause for government departments/agencies not to put required services out on tender. Slide15

SAPO impact on Provinces – DTT Rollout

15The current STB registration and distribution performance per activated Province for the period ending 16 May 2017 is reflected below:

The current year STB distribution focus will be in the

Free

State

and North

West

Provinces.

The current year STB registration

focus will be in the

Northern Cape, Limpopo, Mpumalanga, KZN (Border

line areas only

) and Eastern

Cape

Provinces

(Borderline areas only

)Slide16

SAPO impact on Provinces – other

16

The Postbank – higher focus on financial inclusion to all provinces, especially the rural and unbanked population.

Motor vehicle licences – Accessibility of motor vehicle licence renewal services at post offices to citizens in some provinces creating convenience.

Municipal account payments – Available in most municipalities throughout the country.Payment channel for Government – Payments on behalf of Public works for Expanded Public Works Program.

In SAPO playing the role of the Face of Government in the Provinces the benefits to the Government and citizens are:

Economic stimulation

and growth in areas with post office point of presence, especially rural areas.

Job creation

in local communities for additional Government projects and services rendered by the Post Office.

Financial inclusion

for all our citizens so they can participate in the economy.

Connecting citizens

to Government services.Slide17
Slide18

Conclusion

18

18

This

has been a difficult trading year for SAPO. SAPO had set four objectives in the 2016/17 Corporate Plan, two of the four have been achieved namely;Stabilising the labour environment

Stabilising the operating environment – operations are no longer being disrupted by suppliers who are owed money.

Revenue growth and Financial Stability were not achieved but will be the focus in 2017/18

SAPO has gained a more positive presence with our broad stakeholder body. Reports about SAPO are no longer just negative, corruption is no longer part of our character and irregular expenditure is being brought under control.

Measures have been put in place to improve operational effectiveness in SAPO, although much still remains to be done.

The delayed start in the recovery means that the outcomes of our efforts will only really start to show in second quarter of 2017/18Slide19

19

19

Corporate Plan

2017/18 to 2019/20 Slide20

SAPO Vision and Mission

20

20

SAPO promotes economic growth

by leveraging off its sizeable retail and distribution network

A leading provider of postal, logistics and financial services to the South African market

Vision

Mission

We leverage our established infrastructure and link government, business and

consumers

with each other locally and abroad.

Slide21

SAPO

Current Revenue Split vs Global Postal O

perators

21

21

Globally, postal operators are experiencing a decline in physical mail volumes, which is mainly attributed to digital

substitution.

I

nternet

access is also driving e-commerce growth resulting in a growing demand for parcel and express delivery services.

There

is

also an

increasing need for economic financial inclusion which is driving a greater demand for financial services.

In comparison to its African and International counterparts, SAPO is still heavily reliant on mail revenueSlide22

SAPO’s Planned

Revenue Split22

22

SAPO’s revenue generation strategy focuses on:

deriving maximum revenue from existing products;

developing

new revenue sources by entering new markets segments and;

developing

customised

solutions for key revenue partners

.

A critical pre-condition to achieving the envisaged revenue mix is the corporatisation of Postbank and growing e-commerce revenues.Slide23

Strategic Goals

23

23

1. Revenue Growth

SAPO will grow its revenue by improving the value offering to its customers across existing key product lines and introducing new and innovative products.

SAPO will grow its revenue by diversifying from traditional product lines towards newer offerings where there is greater growth potential i.e. digital services and parcels.

2. Optimised Cost Base

Operating costs will be reduced by improving productivity and increasing the usage of technology within the operating environment.Slide24

Strategic Goals (continued)

24

24

4. Be a Performance Driven Organisation

SAPO will embark on a process of rebuilding its skill base and human resource capacity. The quality of workplaces will be improved and the availability of tools of trade will be increased to enable higher productivity levels across the organisation.

5. Be the Face of Government

SAPO will work to become the service delivery partner to government.

3. Be Operationally Efficient

SAPO intends to increase its operating efficiencies on an ongoing basis without sacrificing its commitment to achieving service standards. Slide25

Financial Plan FY 2018 - 2020

25

25

R6.621bn

FY17/18

Revenue

R6.451bn

Expenses

-

=

R86.59m

Net Profit

R7.869bn

FY18/19

Revenue

R7.341bn

Expenses

-

=

R440.79m

R8.880bn

FY19/20

Revenue

R7.990bn

Expenses

-

=

R797.48m

Net Profit

Net Profit

SAPO

is

targeting a net profit of R87m for the 2017/18FYSlide26

SAPO Capital Structure

26

26

With current capital structure SAPO will

spend over R 2bn in interest payments over the next 6 years.The current interest payments amount to R 301m for the year instead of R 370m as anticipated in the Corporate Plan due to the term loans only being concluded in July 2016 instead of April 2016.SAPO is targeting a 50:50 debt: equity ratio, to ensure an appropriate capital structure. Current debt funding to be

replaced with equity funding from government as a means of reducing the interest burden on SAPO.

Capital injection for SAPO will be considered during the 2017 Mid-term budget process.

If

SAPO relies only on debt funding, the company will be in a position to only settle its loans in FY22. This means that the loan guarantees would have to be rolled over at the end of the current 3 year loan period for another 3 year period.

The

total interest paid until the end of the period will be over R 2.2 billion or

60.6% of the R 3,7 billion loan capital amount that was borrowed

.Slide27

Key areas of focus for

2017/18 year27

27

Branch network and operational efficiency

Postbank licenceSASSA grants readinessRe-launch

a competitive courier

business

I

nvest

to become the e-commerce hub of choice for

Africa. SAPO currently does over R 270m in E-commerce related business but intends to grow this to over R 1,3bn by 2020

Become

government’s delivery partner of

choice

SAPO’s capital structure should have been addressed by 2020

The USO and Social Mandate will be funded by government Slide28

28

28

End of Presentation