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| Onderstepoort Biological Products © | October 2011

Portfolio CommitteePortfolio Committee1111‐‐1212thth

October 2011October 2011

Outline of Presentation


IntroductionHistorical perspectiveVision, mission and mandateVisionary themes (Vision 2020)Governance of OBP

Governance Report Board of DirectorsBoard SubcommitteesNew board of DirectorsExecutive TeamOrganisational Structure

Performance ReportKey Strategic Thrusts and OutcomesNon‐financial Performance Highlights for 2010/11 FY

Workforce ProfileGender and Race DistributionGender and Race employment equity targetsSkills Development

Outline of Presentation (continued)


Financial Performance 2010/11

Financial Performance Highlights for 2010/11 FY

Financials for 2010/11 FY

Revenue and Gross Profit Percentage (%)

Equity and Cash Generated from Operations

Report of Auditor General

Our true customers

Historical Perspective1908:

Establishment of Onderstepoort

Veterinary Research Institute

1968:

Dedicated vaccine facility established

1981:

Vaccine facility operated with trade account and able to begin

to fund operations from sale of vaccines

1992:

OBP separated from OVI (ARC)

2000:

OBP incorporated as a SOE on 6th

September

2001:

OBP received funding of R9 million (last grant received, to date)

2005: State owned land and buildings officially transferred to OBP

2007:

Achieved ISO 9001:2008 certification

2010:

Achieved a revenue milestone > R 100 million

2011: Achieved revenue milestone > R 150 million| Onderstepoort Biological Products © | November 22, 2010

Vision, mission and mandate


Mandate:OBP

exists

to

prevent

and

control

animal

diseases

that

impact

food

security, human health and livelihood

Vision:To

be

a

global

biotech

manufacturer

of

animal

health

products,

underpinned by a skilled, innovative and passionate staff

Mission of OBP:The

mission

of

OBP

is

to

translate

science

into

biological

and

health

products, knowledge and technology resulting in improved animal and human health, food security and safety, for all stakeholders.

The primary objective of OBP is to produce quality vaccines for the prevention and control of livestock diseases in South Africa, Africa and globally.

Visionary Themes


Vision 2020

To become a global centre of

excellence in veterinary

vaccinology driven by our

innovative employees

Recognised centre

of scientific

excellence

Profitability and

growth

sustainability

Production

efficiencies and

optimisation

Product range

expansion

Employer of choice

Products and processes

Diversification

into

human health

Recognised brandlocally and

globally

Effective

distributionnetwork and

satisfied customers

Cost efficiencies

and optimisation

Regulatory

compliance

company wide

Innovative

organisation

>>

>

>

>

>

>>>>

> >

Governance of OBP

State owned company (SOC) of the Department of Agriculture, Forestry and

Fisheries (DAFF)

3B entity under Public Finance Management Act (PFMA) and Treasury

Regulations

Registered taxpayer

Own OBP Incorporation Act (OBP ACT no 19, 1999)

Corporate governance codes & protocols

National Key Point

ISO standards & business specific regulatory authorities

Governance Report


Board of Directors


Director’s Name End of term of office

Adv D Mitchell (Acting Chairperson) 28/02/2011

Mr M Shezi 10/10/2010

Ms N Qata 10/10/2010

Ms N Jaxa 10/10/2010

Mr B Ntshabele 28/02/2011

Dr M Dyasi (MD) 09/06/2011

Mr A Ntsho (Acting CEO) 31 May 2011

Board sub‐committees


The Board comprised of four Committees which met at various

intervals in the 2010/11 financial year :

Committee No. of meetings Special Meetings

Board 2 4

Sub‐committees

•

Risk 2 ‐

•

Audit 2 ‐

•

Remuneration 4 2

•

R&D and Sales &

Marketing2 ‐

New Board of Directors


From left, back row: Ms ND Mobeng (Company Secretary); Dr AT Kgasi; Dr ST Cornelius ; Mr NT Baloyi

From left, front row: Dr PE Hanekom and Dr AH Graham

Absent in photo: Mr JH Adams (Chairperson)

Appointed 1 March 2011

Executive Team


Dr J. Modumo (Business Development Officer); Mr K. Mashala (Acting Chief

Financial Officer); Mr P. Pieterson (Quality Executive); Mr K. Ramoroka

(Special Projects and Planning Executive & Acting Chief Scientific Officer); Dr T. Smit (Chief Operations Officer); Ms N. Mobeng (General Manager:

Legal, Compliance and Company Secretary); Ms M Ramutle (Human

Resources Executive

Absent in photo: Mr A Ntsho (Acting Chief Executive Officer)

Organisational Structure


Performance Report


Key Strategic Thrusts and Outcomes


Key Strategic Thrusts and Outcomes continued


Non‐financial performance highlights for 2010/11 FY


•

6th

September 2010 – 10th

anniversary since incorporatisation as a state owned

company: this has meant 10 years of successful independence and self‐support

for the organisation. •

In September 2010, OBP launched its new brand and logo, as well as 4 new/

improved vaccines: •

Rift Valley fever Clone 13 (against Rift Valley fever for use in

cattle, sheep

and goats); •

Chlamysure (against enzootic abortion in sheep, goats and cattle), •

B‐Phemeral (against three days stiff sickness or bovine ephemeral fever in

cattle) and •

Lumpyskin reduced dose vaccine (against lumpyskin disease in cattle).


OBP achieved record sales:•total sales of 68% above budget •57.6%

increase

in

sales

revenue

growth

compared to the 2009/10 financial year. •Domestic

sales

contributed

80%

of

total

sales

revenue

and

while

export

sales

contributed 20%.•OBP

achieved

unit

growth

in

sales

of

4.6% in the SADC region

• Improved on distribution which increased sales at coop level

• Built relationships with all commodity groups and feedlots

• Supported government initiatives on rural development through training , farmer support and supply of vaccines

•OBP

continues

to

be

active

in

the

FAO,

OIE,

PANVAC

and

SADEC

programmes

through

exhibitions

and

participation

in

scientific forums

Non‐financial performance highlights for 2010/11 FY continued


•

Retained ISO

9001:2008

certification

following 3

years of review of performance •

Ongoing

improvement

in

in

vitro

and

in

vivo

tests

towards achieving ISO 17025 certification by 2012/13•

Research and Development division continued to build

on

previous

years’

achievements

in

developing

and

registering

new

products

to

drive

future

growth

and

delivery

of

our

mandate

– 4

new/improved

products

launched•

Three vaccines (Lumpy skin disease, RVF Clone 13 and

a

Brucella

S19

dossier

update)

were

registered

in

South

Africa

with

Act

36

of

1947

and

a

further

5

vaccines were registered in export markets•

To advance the R&D pipeline to the commercialisation

stage, new collaborations and partnerships have been

signed with local and international institutions to leverage near market opportunities, technology platforms and funding



•

Production

remains

the

main

thrust

of

OBP’s business and in the 2010/11 financial

year,

the

Production

Division

was

again

able

to

improve

its

production

performance

in

comparison

with

previous

years

and

achieve

record

output

in

terms

of

units/doses

of

vaccine

compared

to

the

past 10 years. •

This

was

mainly

achieved

by

improvement

and

ongoing

review

of

various

production

planning

and

scheduling

systems;

effective,

timely

and

innovative

response

to

the

significantly

high

demand

for

vaccines

against

Rift

Valley

fever and

maintaining

a

high

production

success

rate

with fewer batch failures in spite

of

ageing

equipment and infra‐structure.




•

With

the

help

of

maintenance

interventions

the

level

of

availability

of

key

production

equipment

was

maintained

above

95%

throughout

the

reporting

year

resulting

in

reduced

down

town

and

losses

in

production

output.

•

During

2010/11,

OBP

initiated

an

energy

management

program

aimed at containing utility costs in lieu of the rising electrical energy

costs

as

well

as

contributing

to

the

overall

national

environmental

effort to reduce carbon emissions countrywide.•

In order to ensure compliance to the Occupation Health and Safety

Act,

Act

85

of

1993,

in

2010/11

OBP

appointed

a

Plant

Engineer

with

Government

Certificate of

Competency

(Factories).

Subsequently,

the

EMU

Manager

was

appointed

as

Section

(16)2

and the Plant Engineer as GMR (2)1 according to the OHS Act.


•

OBP

launched

a

quarterly

publication

named

Zwahashu.

Zwahashu

is

a

Venda

name

meaning

“FOR

US”.

This

communication

tool

keeps

employees

informed

of

all

the

latest

developments

within

the

organisation.

•

As a good corporate citizen, OBP realises the importance of giving back to

the

communities

we

operate

in.

Employees

donated

clothing,

books

and

food

to

Sunshine

Hospice

in

Garankuwa

and

Carry

You

Ministry

in

Krugersdorp



The Human Resources Management Department continued to implement

strategies

to attract, develop and retain best employees for OBP: •launching

of recognition

awards

scheme

to

recognise

exceptional

employees

who

excelled in demonstrating the core values of the Company•Completion of the implementation of the 50th

percentile market related salaries for

the bargaining forum•Emphasise

was

placed

on

driving

a

high

performance

culture

through

the

implementation of a revised performance management system. •OBP

implemented

an

employee

assistance

programme

known

as

THARI. The

programme

is

aimed

at

assisting

employees

to

balance

the

demands

of

work

with

their family life and provide support 24 hours a day for 365 days a year to employees

and their families. •OBP

spent

3%

of

its

payroll

on

in‐house

training

programmes

to

enhance

the

skills

of 83 employees (40% of the workforce).•12

interns

and

learners

joined

OBP

in

April

2010

for

a

12

months

program

of

intensive technical and behavioural training and development. Some of the interns have since been employed within OBP


Workforce Profile


Occupational

Levels

Male Female Total

A C I W A C I W

Top Management 1 0 0 0 0 0 0 0 1

Executive

Management

3 0 0 1 2 0 0 1 7

Management 8 2 1 6 6 0 0 2 25

Skilled/advanced

operational

25 2 0 9 22 1 0 13 72

Semi‐skilled 31 0 0 2 30 0 0 7 70

Basic skilled 21 0 0 0 8 0 0 0 29

TOTAL

PERMANENT

89 4 1 18 68 1 0 23 204

Temporary

employees

14 0 0 0 15 0 0 0 29

GRAND TOTAL 103 4 1 18 83 1 0 23 233

Gender and race distribution


Gender and Race employment equity targets


Skills development


Occupational Levels Male Female Total

A C I W A C I W

Top Management 0 0 0 0 0 0 0 0 0

Executive

Management

1 0 0 1 2 0 0 0 4

Management 4 0 0 1 3 0 0 2 10

Skilled/advanced

operational

6 2 0 2 10 1 0 3 24

Semi‐skilled 18 0 0 2 11 0 0 5 36

Basic skilled 6 0 0 0 3 0 0 0 9

GRAND TOTAL 35 2 0 6 29 1 0 10 83


FinancialReport

Financial Performance Highlights for 2010/11 FY

o Revenue growth

o R160 million (2010: R102 million)

o Increase in margins

o 73% Gross profit (2010:65%)

o Profits

o Operating profit maintained

o Cash generated from operations

o R48 million (2010: R20 million)


Financials –

2010/11Revenue growth•R 66 million above budget•R 58.6 million above previous year

salesCost Containment•81% increase in expenses vs 58%

growth in revenue

•

Legal costs (matter of

suspended MD – 2% of total

expense

•

33% staff cost increase (50th

percentile adjustment)

•

GEPF liability ‐

3% of total

expenses

•

Launch of 4 new products –

4% of total expenses

•

R2 million increase in repair

and maintenance costs

Account 2011 2010

R ’000

Actual Budget Actual

Revenue 160,193 94, 900 101,621

Cost of sales 43, 811 40, 701 35, 536

Gross Profit 116, 382 54, 199 66, 095

GROSS PROFIT % 72.7% 57.1% 65%

Operating income 501 ‐ 3, 467

Total expenses 96, 207 54, 199 53, 256

Operating Profit 20, 676 ‐ 16, 306

OPERATING PROFIT % 12.9% 0.0% 16.1%

Other income 8, 633 6, 798 8, 492

Profit before tax 29,309 6, 798 24, 798

Taxation 7,797 1,903 2,266

Net profit/ (loss) 21,512 4,895 22,532

Revenue and Gross Profit Percentage (%)

•

Revenue growth of 58% compared to

previous year

•

Increase in turnover since 2007•

RVF outbreak in 2010/11 financial year

(43% of total revenue

•

To date, highest GP in 2011 – 73%•

Innovative ways to reduce costs of

production explored –

industry

norm is ≥

60%•

Sales of products with higher

margins maximised

Equity and Cash Generated from Operations

•

Zero gearing –

thus favourably

positioned to take debt

•

Negative cash generation from

operations in 2009, as well as 2007

•

Decline in cash generated from

operations on 2005‐2007 – loss of

Bluetongue market in Europe

•

Insufficient investment in capital

expenditure (R 75 million Capex budget

approved for 2011/12)

•

High growth in sales (and increase

maintenance and repair costs) justifies

investment in capital expenditure

Report of Auditor General


•

OBP was audited by the Auditor General for the first time in over 5

years

•

Opinion given for 2010/11 financial year is a qualified Audit

•

Basis for qualified audit

•

Work‐in‐progress (WIP)

•

Inventories for WIP have historically not been included on 31

March of each financial year

•

Consequently valuation of opening balance for WIP (of

R 1.882 million) for 2010/11 was not adequately

determinable or verifiable

•

Property Plant and equipment

•

Assets <R5000 were historically expensed

•

Valuation and allocation of minor assets

amounting to R0, 838 million was not verifiable


Our true customers

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