ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2014
PRESENTATION TO THE PORTOLIO COMMITTEE ON
TELECOMMUNICATIONS AND POSTAL SERVICES
21 OCTOBER 2014
CONTENTS:
1.
BUSINESS REVIEW
2.
OPERATIONAL REVIEW
3.
SUSTAINABILITY REPORT
4.
ANNUAL FINANCIAL STATEMENTS
5.
CONCLUSION
BUSINESS REVIEW:
Highlights of the Financial Year
●
Performance
o For the 2013/14 financial year, SENTECH achieved 90.9% of its annual Key Performance Indicators
(outlined on the Corporate Plan) as shown below :
No of
Targets
Key Performance Indicators
o
●
10
% Achieved
Not
Achieved
90.91%
1
% Not
Achieved
9.09%
The target not achieved is for the Digital Terrestrial Television (DTT) population coverage of 84%, the
performance level was 82.1%. The Board and management anticipate to complete the project by 31
December 2014. The company is ready for analogue switch off (ASO) in June 2015, in accordance with
International Communications Union (ITU) Agreement.
Audit opinion
o SENTECH received a clean audit report from the external auditors for the second financial year in a row
with our external auditors having declared the following:
•
•
•
●
11
Achieved
Unmodified opinion on financial statements;
No material findings on predetermined objectives; and
No material findings on compliance with laws and regulations.
Financial
o The company is liquid and operating as a going concern and has a healthy balance sheet. This will be
expanded in the Annual Financial Statements section.
SENTECH SOC LIMITED | Annual Report 2013/14
3
OPERATIONAL REVIEW:
Performance Overview
Strategic Goals
Strategic
Objectives
Key Performance
Indicators
Annual Performance Targets
Target
Actual
Achieved or
not Achieved
Comments
•
Population covered
via the Digital
Terrestrial Network.
84%
82.13%
Not Achieved
•
SG 1: Ensure
that ICT
infrastructure is
accessible,
robust, reliable,
affordable and
secure to meet
the needs of the
country and its
people.
Ensure universal
access of the digital
broadcasting signal
distribution network.
•
Late delivery of UHF antennas to the
Oudtshoorn, Uniondale, Uniondale Town,
Willowmore, Ulundi, Riversdale, Piet Retief,
Napier, Upington, Upington Town, Beaufort
West, Graaf Reinet, Kuruman Hills, De Aar,
Prieska, Pomfret, Springbok, Pofadder,
Garies, Victoria West and Van Rhynsdorp
sites.
Site acquisition challenges at Sterkspruit and
Clifton.
Site access challenges at the Colesburg
installation.
Population covered
through Direct-toHome Satellite gapfiller platform.
100%
100%
Achieved
None
Formal submission
of the Broadcasting
Signal Distribution
Master plan to the
SIP15 Steering
Committee.
Submission To
SIP15
Committee by
end of Q3.
Submission To
SIP15
Committee by
end of Q3.
Achieved
None
Establish an open
access Direct-ToHome Satellite
platform to promote
growth of the local
content development
industry..
Commercial open
access DTH-S
platform.
Launch DTH-S
platform
Launch DTH-S
platform
Achieved
None
Number of new
DTH-S and MCD
open access
platform users.
5
8
Achieved
The number of new DTH-S customers and MCD
Open Access Platform users exceeded the target
by 60%.
Ensure universal
access connectivity
to public institutions.
Number of VSAT
terminals installed
(cumulative).
Achieved
The number of VSAT terminals installed
exceeded the target by 274%, due to an
unprecedented growth in the market during the
period under review
50
137
4
OPERATIONAL REVIEW:
Performance Overview
Strategic Goals
Strategic
Objectives
Key Performance
Indicators
Annual Performance Targets
Target
SG 2: Ensure high
levels of customer
and stakeholder
satisfaction by
meeting their needs
at all times.
SG 3: Drive
organisational
performance in
order to improve
organisational
effectiveness.
SG 4: Ensure that
the company is
financially
sustainable.
Ensure that network
Weighted average
availability meets
availability based
SLA requirements
on product revenue.
across all platforms.
99.80%
Actual
99.86 %
Achieved or not
Achieved
Comments
Achieved
There was an improvement in the efficiency
of network availability, especially with regard
to analogue television and FM radio,
resulting in a better-weighted average
availability, based on product revenue.
Improve customer
and stakeholder
satisfaction.
Customer and
stakeholder service
index.
62%
87%
Achieved
The improvement in customer satisfaction of
over 20% of the target was realised by
putting in a concerted effort to address all
customer concerns that had been raised
during the Baseline Survey.
Improve employee
engagement and
satisfaction.
Employee
engagement and
satisfaction levels.
60%
62%
Achieved
The Employee Satisfaction Survey exceeded
the target due to an improvement in the
company’s operational management
Improve employee
performance.
Percentage of
managers
performing at
different levels.
Achieved
None
Maintain
sustainable Return
on Net Assets
(RONA).
RONA from
continuing
operations.
Achieved
The RONA from continued operations
exceeded the target due to an improvement
in profit before interest and taxation of the
budgeted amounts.
Performance
contracts signed by
Establish baseline
all executive
performance
directors,
measures.
executives and
heads.
10.00%
15.4%
5
SUSTAINABILITY REPORT
Summary
Corporate Governance
● The Company further supports and endorses the guiding principles of the Code of Corporate Practices and
Conduct as articulated in the King III Report, to the extent that they are not in conflict with the Company’s primary
legislative documents, as stated above. The Company is continuing to design and implement the necessary
governance systems to ensure compliance.
Human Resources
● SENTECH started a crucial journey of becoming a high-performance organisation, focused on better customer
services, more effective and efficient operations and a new level of service delivery. In support of this journey, an
integrated performance and development management system was successfully implemented at executive and
management level.
Corporate Social Investment
● SENTECH endeavours to focus its resources in the ICT sector with special emphasis on connecting institutions of
learning. This relates to providing VSAT connectivity to primary and secondary schools in rural and/or
underserviced areas. Within this strategy, and in instances where the school does not have computer facilities, the
CSI provision is further extended to computer hardware and software. The period of sponsored internet
connectivity is five years, upon which the Department of Education and/or the municipality in the area will take over
the account. This is agreed upon prior to installing the Computer Labs. SENTECH also continued with its
investment in Mindset Learn.
Risk Management
● Enterprise Risk management (ERM) is the responsibility of the Board. The Board delegated the task of monitoring
the risk management process to the Audit and Risk Committee via the Committee’s Terms of Reference. The
Executive Committee is responsible for ensuring that all significant risks facing the company are managed in
accordance with the Risk Management Policy and Framework approved by the Board. During the year under
review, the Risk Policy Framework was revised and adopted, a Fraud Prevention Plan and Assurance Process
Plan were prepared and adopted, and risks linked to KPI’s were identified and assessed.
SENTECH SOC LIMITED | Annual Report 2013/14
6
SUSTAINABILITY REPORT
Summary (cont)
Internal Audit
● The Audit and Risk Committee (ARC) ensured that SENTECH has an effective risk-based and independent
Internal Audit Function (IAF), governed by an Internal Audit Charter, which was approved by ARC. The IAF
adheres to the Standards and Code of Ethics set out by the Institute of Internal Auditors.
Compliance
● SENTECH has a full-time Compliance Officer who reports directly to the Executive Internal Audit. During the period
under review, the Compliance Unit conducted the monitoring of health and safety requirements; developed a PAIA
Manual which was approved by Exco and the ARC; developed a Compliance Plan for 2014; and prepared a highlevel awareness document in relation to the PAJA, PAIA and POPI.
Innovation
● At the beginning of the 2013/14 financial year SENTECH resolved to establish the Innovation HUB – to specifically
focus on the development of new platforms and business solutions that would enable the company to take
advantage of these new opportunities.
● Over the past year, the Innovation HUB has focused on the new product roadmap that forms part of the DTT
Business Plan. Key to this new product roadmap was the development of platform services for digital TV that
incorporated the upgrade and renovation of the SENTECH Direct-To-Home Satellite Service. In this regard
SENTECH created a platform brand, FREEVISION, to host the services of different customers
SENTECH SOC LIMITED | Annual Report 2013/14
7
FINANCIAL OVERVIEW:
Summary
●
Group revenue from operations (excluding Dual Illumination) increased by 8.4% to R975 million (2013 R899
million).
●
Total Income for the Group increased to R1 062 million (2013: R927 million)
●
Group operating profit from operations increased by 4% to R201 million.
●
Cash generated from operations decreased to R47 million from R226 million.
●
The Broadband funding including interest net of taxation of R622 million was returned to Treasury during the
period
●
R110 million was spent on additions to Property, Plant and Equipment in 2014 using SENTECH’s own funds.
●
The Group has presented 2 comparative years as a result of the following restatements that occurred:
o
The taxation related to previous wear and tear in 2013 was incorrectly not deducted, based on the advice of
our tax advisors it was concluded that the amounts were in fact deductible. This has had the impact of
reducing the tax liability of R18 million. There was also an increase in the deferred tax liability of R5 million
due to a change in treatment of items in the tax calculation that impact deferred taxation.
o
In the past, spares have been re-classified from Inventory to Property, Plant and Equipment and were
depreciated over what was considered the appropriate useful life of the assets. After reviewing IAS 16 it was
concluded that this was incorrect and the Spares were actually inventory. This has resulted in an increase in
inventory and a decrease in Property, Plant and Equipment.
8
FINANCIAL OVERVIEW:
Statement of Profit or Loss & Other Comprehensive Income
2014
2013
Restated
R'000
Revenue
R'000
899 383
8%
Cost of Sales
(670 566 )
(496 590 )
35%
Gross profit
304 721
402 793
-24%
Operating and other expenses
41 410
-
Group revenue from operations
(excluding Dual Illumination)
increased by 6.6 % to R886 million
(2013: R831 million).
●
Group operating profit from
operations increased by 4 % to
R201 million.
●
Other Income of R41 million
resulted from the settlement of the
Post Retirement Medical Aid
Benefit.
●
Finance cost decreased materially
due to reversal of interest of R173m
net of taxation in the prior year
which was earned on Broadband
and Eassy grant funding not used,
previously recognised in own
income.
●
Taxation expense decreased due to
the deduction of amounts paid to
National Treasury for Broadband
and Eassy.
%
Change
975 287
Other Income
●
100%
(144 746 )
(209 157 )
-31%
Operating Profit
201 385
193 636
4%
Finance Income
46 202
27 485
68%
Finance Costs
(23 103)
(193 030)
-88%
Profit before taxation
224 484
28 091
699%
Tax expense
(11 511 )
(50 165)
-77%
Profit (Loss) for the year
212 973
(22 074 )
-1065%
33
(9 413)
100%
28 208
-100%
Other comprehensive income (net of tax)
Actuarial gains and losses on defined benefit plans
Revaluation of property, plant and equipment
Total comprehensive income /(loss)
213 006
(3 279)
64 99%
9
FINANCIAL OVERVIEW:
Statement of Financial Position
2014
Total non-current
assets
Total current assets
Total Assets
Total equity
Total non-current
liabilities
Total current
liabilities
Total equity and
liabilities
2013
2012
Restated
Restated
R'000
R'000
602 409
545 629
506 988
10%
1 239 329
1 688 836
1 703 503
-27%
2 234 465
2 210 491
-18%
1 841 738
1 166 200
953 194
R'000 % Change
956 473
●
Non- Current Assets consists of Property, Plant
and Equipment which is presented net of
Government Grants. The increase in the balance
was due to additions.
●
Included in current assets are :
o
o
o
●
Equity increased as a result of Retained Income
increase due to an increase in the net profit for the
year.
●
Non current liabilities decreased due to the partial
settlement of the Post Retirement Medical Aid
Benefit and the Closure of the Pension Benefit
Plan. This also resulted in the significant increase
in the deferred tax liability.
●
Current liabilities decreased significantly due to :
22%
138 540
222 433
196 557
-38%
536 998
1 058 838
1 057 461
-49%
1 841 738
2 234 465
2 210 491
-18%
Cash and cash equivalents of R1 077 million. This is made
up of restricted cash relating to government grants of R366
million. The reason for the decrease in the balance was due
to R622 repaid to National Treasury with respect to the
Broadband and Eassy projects .
Trade and other receivables balance decreased by 34%
due to improved collections .
Current tax receivable increased significantly due to the
deduction of amounts paid to National Treasury for
Broadband and Eassy. 2013 current tax was restated by
R18 million due to allowances for depreciation of grant
funded assets that had not been taken into account in the
current tax calculation.
o
o
o
Full settlement of the DBSA Loan.
Trade and other payables decreased as a result of a drive
by the group to pay its creditors within 30 days in order to
apply best practice in line with the Treasury Regulations for
departments .
Grants payable decreased due to the repayment made to
National Treasury .
10
FINANCIAL OVERVIEW:
Statement of Cash Flow
2014
●
2013
Restated
R'000
R'000
o
% Change
●
Cash inflow in operating activities
47 609
225 662
Cash flows from operating activities
decreased due to :
-79%
Cash flows from investing activities
decreased due to :
o
Cash flows from investing activities
-290 493
-457 012
-36%
●
Cash flows from financing activities
-239 946
185 673
-229%
●
●
Net (decrease) increase in cash and
cash equivalents
Cash and cash equivalent at the
beginning of the year
-482 830
-45 677
1 560 260
1 605 937
957%
●
1 077 430
1 560 260
Less additions being purchased in the current year
Cash flows from financing activities
decreased due to:
The repayment of DBSA loan in full and
payment of the ICASA settlement liability.
Repayment of the Broadband and Eassy
funds to National Treasury
Payments made to employees who agreed
to the settlement of their post retirement
medical aid benefit obligation .
-3%
●
Total comprehensive income /(loss)
A decrease in the Trade payables balance as a
result of these being paid within 30 days
-31%
Sentech plans to spend R645m Capital
Projects over the next 3 years using its own
funds.
11
Conclusion
Conclusion
●
The Strategic Plan for the 2014 to 2017 MTEF period will continue with the core strategic interventions by the
Company: Enabling access to universal, open, inter-operable and affordable network platforms for broadcasting
and content distribution.
●
The Board of Directors challenged the Executive Management and all employees to exceed their performance in
the following areas:
o Clean audit and administration;
o innovations that will continuously bridge the digital divide; and
o financial sustainability of the company.
SENTECH SOC LIMITED | Annual Report 2013/14
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SENTECH SOC Limited