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ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD
PRESENTATION TO THE PORTFOLIO COMMITTEE:
8 MARCH 2006
PRESENTATION OUTLINE:
Introduction (Ms N D Shabalala, Board Chairperson)
Business Plan (Dr L Makuleni – Managing Director)
Budget 2006/07 (Mr M P van Jaarsveld – Chief Financial Officer)
Conclusion (Dr L Makuleni)
INTRODUCTION
OBP FUNCTIONING BOARD COMMITTEES
Board
Audit Committee(Adv D J Mitchell)
Remuneration Committee
(Ms N D Shabalala)
Risk ManagementCommittee
(Dr R U Forbes)R & D Committee(Mr S S M Seane)
FUNCTIONING OF BOARD COMMITTEES
Remuneration Committee:Remuneration:
DirectorsExecutivesEmployees
Assessment of PerformanceHuman Resource Matters
FUNCTIONING OF BOARD COMMITTEES
Audit Committee:Controls:
Internal Audit External Audit
Financial MattersManagement AccountsInvestmentsFinancial Policies
FUNCTIONING OF BOARD COMMITTEES
Risk Management Committee:
Annual Risk Assessment
Risk Management – mitigating risks
FUNCTIONING OF BOARD COMMITTEES
Research and Development Committee:
Monitor and assess R & D projects
Intellectual Property Management
BUSINESS PLAN2006/07:
Business Plan
OBP MandateMarket DefinitionSituation AnalysisPrimary Strategic ObjectivesPrimary Strategic Initiatives
COMPANY MANDATE
“To play a pivotal role in the management and prevention of animal diseases in the Country, SADC, and Africa”
MARKET DEFINITION :Biotechnology, Animal Health, Veterinary
VaccinesGeographic Focus
Domestic Commercial Emerging sectorGovernment Tender Business
International:SADC, East Africa, North Africa, West AfricaEUMiddle EastSouth AmericaIndia, China
MARKET DEFINITION :Target Species:
Cattle, Sheep, Goats, HorsesOther possible species (e.g. poultry, rabies, camel)
50 Products:Bacterial, Viral, protozoa and diagnosticProduce vaccines unique to African disease (tick-
borne and insect-borne, African Horse Sickness, Bluetongue, Lumpy Skin Disease, Rift valley Fever, CBPP)Sole / main producer of eight vaccinesBroad product range (Clostridial, Neo-natal,
reproductive, respiratory etc.)Local Strains
MARKET DEFINITION: SOUTH AFRICAN ANIMAL HEALTH MARKET
SIZE FOR THE 2005 CALENDAR YEAR
Total Market R843 millionAntibiotics R241 millionEctos R161 millionEndectos R76 millionEndos R65 millionVet. Vaccines R70 million (excluding Intervet)
(OBP Ltd R 38.8 million)
SITUATION ANALYSIS: Well established competitors Well trained sales, marketing, and technical staff Broader Animal Health Product Range Distribution channels established and profit
margin driven Stringent Regulatory requirement Internationally,
Local Regulatory requirement less stringent International Markets Requirement - GMP
Accreditation Well informed customers Outbreaks of Trans-Boundary Diseases
STRATEGIC OBJECTIVES : Financial objectives
Sales Revenue 2006/07 = R113.65m 2007/08 = R136.48m 2008/09 = R164.18m
Obtain gross profit margin of 35%
STRATEGIC OBJECTIVES: 2005/6
FinancialCapex spend of R33 millionR&D operational expenses 5% of
Sales RevenueBEE: 40% x Procurement
STRATEGIC OBJECTIVES 2005/6
Non – FinancialUpgrade of Packaging DepartmentProduction Success Rate 90%ISO Accreditation Audit ReviewRelease 2 products per yearEE & Skills PlanImplement Succession PlanEnsure Good Corporate Governance:
Risk AssessmentThree year rolling Internal Audit Plan
STRATEGIC OBJECTIVES
HRD BUDGET 2005/06OCCUPATIONAL LEVELS TARGET 2005/6 TOTAL NO. OF
BENEFICIARIES Amount allocated R1,354,730.00 (incl.
skills levy)211
Top Management R213 000.00 7Professionally qualified and experienced specialist and middle management
R188 366.00 19
Skilled technical and academically qualified workers, supervisors, foremen
R300 000.00 33
Semi skilled and discretionary decision making
R300 000.00 94
Unskilled and defined decision making
R200 000.00 58
Total 211
STRATEGIC OBJECTIVES
HRD BUDGET 2006/7Occupational levels Target 2006/7 Total no. of
beneficiaries Amount allocated 1742641.00 ( incl.
skills levy)204
Top Management 208792.00 147Professionally qualified and experienced specialist and middle management
256571.00 19
Skilled technical and academically qualified workers, supervisors, foremen
500261.66 33
Semi skilled and discretionary decision making
264487.66 94
Unskilled and defined decision making
152527.66 58
Total 204
EMPLOYMENT EQUITY TARGETS 2005/6
Occupational levels Black Colored Indian White
Female Male
Disabled
Top Management 4 3 2 5Professionally qualified and experienced specialist and middle management
8 1 1 9 8 11
Skilled technical and academically qualified workers, supervisors, foremen and superintended
11 3 1 18 18 15 1
Semi skilled and discretionary decision making
66 28 42 52 2
Unskilled and defined decision making
51 6 2 56 3
Total 141 4 2 64 72 139 6
EMPLOYMENT EQUITY ACTUAL TO DATE
0102030405060708090
Top Management Professionallyqualif ied andexperiencedspecialist and
middlemanagement
Skilled technicaland acedemically
qualif iedw orkers,
supervisors,foremen and
superintended
Semi-skilled anddiscretionary
decision making
Unskilled anddefined decision
making
Black Coloured Indian White Total
EMPLOYMENT EQUITY ACTUAL VS. TARGET FOR
2006/7Occupational levels
African Coloured Indian White Total Disabled
Actual Target
Actual Target
Actual
Target
Actual
Target
Actual
Target
Actual
Target
Top Management
5 5 3 3 7 7
Professionally qualified and experienced specialist and middle management
7 7 1 1 1 2 9 9 18 18 1 1
Skilled technical and academically qualified workers, supervisors, foremen
6 12 3 5 0 3 21 20 34 38 1
Semi skilled and discretionary decision making
41 42 1 2 2 29 27 71 74 5 5
Unskilled and defined decision making
72 72 0 0 6 6 78 78 1 1
EMPLOYMENT EQUITY TARGET STATS 2006/7
0
50
100
150
200
250
Top Management P rofessionallyqualified andexperienced
specialist andmiddle
management
Skilled technicaland acedemicallyqualified workers,
supervisors,foremen and
superintended
Skilled technicaland acedemicallyqualified workers,
supervisors,foremen and
superintended
Unskilled anddefined decision
making
Total
Black Coloured Indian White Total
EMPLOYMENT EQUITY TARGET 2006/7
Actual Target Actual Target Female Female Male Male Top Management 2 2 5 5
Professionally qualified and experienced specialist and middle management 7 7 11 12
Skilled technical and acedemically qualified workers, supervisors, foremen and superintended 19 24 15 16
Semi skills and discretionary decision making 35 34 36 39
Unskilled and defined decision making 27 27 51 51
GENDER ACTUAL VS TARGET 2006/7
Actual Target
Occupational Levels Female Male Female Male
Top Management 2 5 2 5
Professionally qualified and experienced specialist and middle management 7 11 7 12
Skilled technical and academically qualified workers, supervisors, foremen and superintended 19 15 24 16
Semi skilled and discretionary decision making 35 36 34 39
Unskilled and defined decision making 27 51 27 51
Total 90 118 94 123
GENDER ACTUAL VS TARGET 2006/7
0102030405060
Actual Female Target Female Actual Male Target Male
STRATEGIC INITIATIVES 2005/6
OBP Strategic Initiatives - - National Imperatives
Investment in Infrastructure Skills DevelopmentAccelerated Growth: Livestock
Sector
OBP Strategic Initiatives 2005/6
OBP Strategic Initiatives - - National ImperativesInvestment in Infrastructure
Upgrade of Facility and Equipment - GMPImprove Production ProcessesImprove Production Planning SystemPreventative Maintenance of Facility and
Equipment
OBP Strategic Initiatives 2005/6
OBP Strategic Initiatives - - National Imperatives:
Skills DevelopmentOBP Technical , Sales & Marketing Dept
Farmers days ( NB OBP, Provincial Dept – AHT & State vets,)
Disease management programOBP/ UP /ARC-OVI : CollaborationExpert Panel Meetings
OBP Strategic Initiatives 2005/6
OBP Strategic Initiatives - - National Imperatives:
Build Expertise Production Process TechnologyIP management Learnership Program - Process
Engineers in BiotechnologyBuilding R&D capacity & capabilitySuccession Planning
OBP Strategic Initiatives 2005/6OBP Strategic Initiatives - - National
ImperativesAccelerated Growth:
Marketing and Distribution
Vaccine manufacturing facilities within the Continent
R&D on Trans boundary diseases – vaccinesCBPP, Rinderpest, PPR, Sheep & Goat Pox
OBP Strategic Initiatives 2005/6OBP Strategic Initiatives - - National
ImperativesAccelerated Growth:
New / Improved ProductsMaster Seed ManagementTotal Quality Management
Experimental Animal FacilityInternational Registration of OBP
Product Line
BUDGET: 2006/07
PROFIT BEFORE INTEREST & TAX
Budget2006/07
Budget2005/06
Variance
R5.2m -R3.7m R8.9m (+100%)
PROFIT BEFORE INTEREST & TAX
R8.9m Improvement due to:• Increase in Sales 22%
In spite of• Increase in Cost of Sales (-
10%)• Increase in Overheads (-15%)
INCREASE IN SALES
Budget2006/07
Budget2005/06
Variance
Local Sales
R55.8m R40.8m R15.0m(37%)
Export Sales
R57.8m R52.4m R5.4m(10%)
Total Sales
R113.6m R93.2m R20.4m (+22%)
COST OF SALES
Budget2006/07
Budget2005/06
Variance
R66.8m R60.8m R6.0m (-10%)
COST OF SALES
R6.0m Increase due to:• Increased repair & maintenance
R1m• Increased Depreciation R5m
OVERHEAD EXPENSES
Budget2006/07
Budget2005/06
Variance
R41.6m R36.1m R5.5m (-15%)
OVERHEAD EXPENSESR5.5m Increase due to:• New positions & vacancies R3.7m• Market related salary adjustment R3.1m• Contractors (Work study, Audits, etc.)
R0.6m• Increased Travel: R0.8m
OVERHEAD EXPENSESR5.5m Increase due to:• Increased Marketing: R0.9m• Other R0.4m• Higher salary recovery in COS
(-R4.0m)
CASH FLOW 2006/07Cash flow from operations
R13.2m
Capex R33.1mCash flow for the year -R19.8m
Opening bank balance R75.9mClosing bank balance R56.1m
CAPITAL EXPENDITURE
Upgrade Packaging R15.0mPackaging Equipment R4.0mBacterial Prod. Equipment R3.4mOther Equipment R5.5mERP & Computer Equipment R2.9mLand & Building (excl Pack.) R1.4mFurniture & Fittings R0.4mVehicles R0.4mTotal R33.1m
GRAPHICAL COMPARISON OF BUDGET TO PREVIOUS
YEARS
• Sales (Local & Export)• Expenses• Expenses as % of sales
Local Sales
35,829,635
42,298,528
55,850,207
36,646,788
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Export Sales
34,071,201
29,192,042
39,506,618
57,803,288
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Staff Cost
22,299,365
30,578,14828,244,232
42,242,895
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Marketing Expenses
2,049,257
2,621,903
2,052,737
4,245,163
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Travel Expenses
847,134
1,547,1381,368,661
2,847,400
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Premises Expenses
2,328,656
4,597,729
1,440,006
4,985,418
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Operations Expenses (R&D)
1,609,291
4,548,549
2,254,355
4,807,888
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Admin Expenses
1,532,775
2,996,744
4,616,118
1,491,230
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
2003/4 2004/5 2005/6 2006/7
Actual Budget Linear (Actual)
Staff cost as a % of sales
20%
25%
30%
35%
40%
45%
2003/4 2004/5 2005/6 2006/7
Overheads as a % of sales
0%
1%
2%
3%
4%
5%
6%
7%
2003/4 2004/5 2005/6 2006/7
Travel Marketing Premises Operations (R&D) Admin Costs
CASH FLOW FOR 2006/07Retained income 6 112Plus Depreciation 12 939Operating Capital needed
- 5 786
Capital Expenditure -33 052Net Cash flow -19 787Opening Bank Balance 75 952Closing Bank Balance 56 165
R’000
BALANCE SHEET FOR 2006/07
Fixed Assets (PPE) 49 095Current Assets 94 773Total Assets 143 868Capital & reserves 114 568Long term Liability (Def. Tax)
1 424
Current Liabilities 27 876Total Equity & Liabilities
143 868
R’000
BALANCE SHEET & CASH FLOW
• Land & Buildings transferred in 2005/06 – Valued at R47m
• Increase in Operating Capital R5 786 needed as Sales increase
• Negative cash flow mainly due to Capital expenditure: R33.1m
CONCLUSION:
VALUE ADDING ACTIVITIES
Ensure a domestic capacity in vaccine production which will enable DoA to respond to disease outbreak.
Address disease problem specific to the region
Produce market driven products
VALUE ADDING ACTIVITIES
Establish an economically viable Business Enterprise
Develop & retain local vaccine production related skills & expertise.
Establish strong R&D capabilities
CONCLUSION:
“To play a pivotal role in the management and prevention of animal diseases in the Country, SADC, and Africa”
CONCLUSION:Sincere Appreciation
ShareholderOBP Ltd BODOBP Ltd ExcoOBP Ltd MancoOBP Ltd StaffWE CANNOT SPELL SCCESS WITHOUT U