1 / 117

PRESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES 19 September 2007

PRESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES 19 September 2007. AGENDA. OPENING REVIEW BY CHAIRMAN FRED PHASWANA OVERVIEW OF PERFORMANCE OF TRANSNET MARIA RAMOS REVIEW OF FINANCIAL PERFORMANCE CHRIS WELLS

abston
Download Presentation

PRESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES 19 September 2007

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. PRESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES 19 September 2007

  2. AGENDA • OPENING REVIEW BY CHAIRMAN FRED PHASWANA • OVERVIEW OF PERFORMANCE OF TRANSNET MARIA RAMOS • REVIEW OF FINANCIAL PERFORMANCE CHRIS WELLS • HUMAN RESOURCES STRATEGY AND PROGRESS PRADEEP MAHARAJ • OPERATING DIVISIONS REVIEW CHIEF EXECUTIVE OFFICERS • CONCLUSION AND WAY FORWARD MARIA RAMOS

  3. OPENING REVIEW: CHAIRMAN OF TRANSNET • The compact with the Shareholder sets out: • Transnet’s mandate • The strategic objectives to be attained by Transnet • The Key Performance Areas and Indicators to measure Transnet’s performance during a • certain period

  4. SHAREHOLDERS COMPACT: MANDATE “The mandate for Transnet remains as determined by the company’s founding documents, by prevailing legislation and by this Compact” Transnet’s key role is to assist in lowering the cost of doing business in South Africa and enabling economic growth through providing appropriate ports, rail and pipeline infrastructure and operations in a cost effective and efficient manner and within acceptable benchmark standards

  5. SHAREHOLDERS COMPACT: STRATEGIC OBJECTIVES 4 KEY AREAS

  6. SHAREHOLDERS COMPACT: FINANCIAL KPI’s

  7. CONCLUSION: TRANSNET PERFORMANCE 2006/07 • Pleasing progress made in implementing Transnet’s Strategy • Significant investment in human and physical capital • Strong governance and risk processes • Achieved all the financial objectives – strong balance sheet • Now focussed on core Businesses – major non-core assets disposed off • Platform created for future growth and service delivery

  8. MARIA RAMOS OVERVIEW OF PERFORMANCE OF TRANSNET

  9. TRANSNET’S VISION AND MISSION Transnet is a focused freight transport company delivering: Integrated, efficient, safe, reliable and cost effective services which help promote economic growth in South Africa INCREASED Market share IMPROVED Productivity and profitability PROVIDING Capacity for customers ahead of demand

  10. TRANSNET VALUES We are: Reliable Trustworthy Responsive Safe service provider TRANSNET’S CUSTOMERS PREFER US BECAUSE: OUR EMPLOYEES ARE: • Thinking • Disciplined • Results orientated • Ethical • Committed • Safety conscious • Accountable

  11. 4-POINT TURNAROUND STRATEGY Strategic Intent Delivering efficient & Competitive services Focused freight transport company Enabling economic growth Strategic Balance Sheet Management Ensure Corporate Governance & Risk Management Develop Human capital Redirecting & re-engineering the Business 4-point Turnaround Strategy

  12. RATIONALE FOR REBRANDING We chose the monolithic route to mirror the new corporate strategy and structure of the Company To communicate the integrated and customer-centric approach of the new Company Enforcement of the consistent application of the new Transnet identity throughout the organization To present a consistent face to customers as a platform to build and sustain momentum as Transnet gears itself for sustainable growth To consolidate employee energies, and maximise economies of scale and brand assets in building Transnet and its unique offerings, and To create a singular platform to leverage and reinforce the “One Company, One Vision” philosophy

  13. FINDINGS AND RECOMMENDATIONS • The current name, Transnet, should be retained • Transnet should refresh its brand image to reflect: - Customer centeredness - Reliability - Cost-efficiency - Transparency - Competitiveness - Flexibility - OD alignment - Improved communication • Preference for a monolithic or endorsed brand architecture, particularly amongst customers. In particular, customers, preferred one dominating name for Transnet with reference to its ODs to emphasize unity but distinguish between the core businesses

  14. NEW TRANSNET BRAND ARCHITECTURE Discontinued Businesses Supporting businesses: Transnet Properties and Transnet Projects

  15. THE WAY FORWARD: BRANDING Use the brand to: • Underpin the growth strategy • Drive integration • Support Transnet’s new culture • Establish Transnet as a leading corporate in South Africa • Enabling growth by optimising the efficiency and competitiveness of the country’s freight transport and logistics • Act as a catalyst for the growth of the economy

  16. STRUCTURE TO SUPPORT STRATEGY TRANSNET COMPANY Operational divisions(continued businesses) Discontinued Businesses Discontinued businesses • SA Express • Transtel Telecoms • Viamax • Autopax • freightdynamics • Housing Lending Book • Shosholoza Meyl • Arivia.kom PORTS RAIL PIPELINE National Ports Authority Port Terminals Pipelines Freight Rail Rail Engineering Supporting businesses: Transnet Property and Transnet Projects

  17. STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE Investment On target with 2007 (R11,7 bn) roll out of five-year investment plan Replacement of assets (R8,2 billion) Expansion investments (R3,5 billion) Major projects commenced and spending next five years per Corporate Plan New Multi Product Pipeline (NMPP) from Durban to Johannesburg (R9,3 billion; latest estimate R11.2bn) Widening and deepening of the entrance channel at the Port of Durban (R2,6 billion) New container terminal at Durban Pier 1 (R1,3 billion)

  18. STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE Investment continued Major projects commenced and spending next five years per Corporate Plan Durban container terminal re-engineering (R1,4 billion) Cape Town container terminal expansion (R4,2 billion) Ngqura Container terminal (capacity from 2010 onwards) (R6,1 billion) Coal line capacity expansion to 86 mtpa (R3,3 billion) Ore line expansion to 47 mtpa (R3,8 billion) Acquisition of 404 new locomotives (R4,9 billion) Project management: Establishment of Transnet Projects Focus on: Co-ordination, implementation, skills, planning and delivery

  19. Disposal of non-core assets Businesses disposed Buyer Price South African Airways (Pty) Ltd (100%) Department of Public Enterprises R2 billion (no cash flow – transaction effected by share buy-back) V&A Waterfront Holdings (Pty) Ltd (26%) London & Regional Consortium R1.8 billion Transtel Telecom FSN Metro assets Neotel (Pty) Ltd (formerly the Second Network Operator) R250 million (funded by issue of equity of 15% in Neotel (Pty) Ltd via Transpoint Properties (Pty) Ltd) Equity Aviation Services (Pty) Ltd (49%) Equity Aviation Services (Pty) Ltd (and employee share scheme) R70 million VAE Perway (Pty) Ltd (35%) VAE SA (Pty) Ltd R30 million Transnet Pension Fund Administrators (100% - administration and investment services) Metropolitan Life (including Kagiso Trust Investments) and Fifth Quadrant respectively R20 million and R3 million, respectively STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  20. Disposal of non-core assets – Subsequent events STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE Businesses Buyer Price “C” Preference share Newshelf 664 (Pty) Ltd R5,7 billion – Cash received Viamax Pty Ltd (100%) Bidvest Ltd Approximate R1,0 billion • Cash to be received shortly Transnet Housing Loan Book FirstRand Bank Ltd Fair value of R1,4 billion – Subject to Competition Commission approval Total proceeds of disposals approximately R10bn

  21. STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE Human capital development Achievements: Focus on: Skills demand planning Capacity building and skills development Talent management Skills mapping completed Leadership development plans Prioritising skills and succession planning SPO’s defined for all managers and performance assessed Performance management HR processes in place to become employer of choice Attract critical skills Change management programmes in place Organisational culture HR Enablement New HR policies, standardised supporting procedures Additional capacity building 175 additional engineering bursaries 173 students at institutions of technology (to be increased to 300) 1 261 additional apprentices in different trades 20 Thuthuka bursaries through SA Institute of Chartered Accountants

  22. Re-engineering the business: Vulindlela projects Second year of implementation Improve productivity levels and operational efficiencies Orientate businesses towards customers Address safety Culture of planned maintenance Increase in market share – volume growth (especially GFB in Spoornet) Savings of more than R2 billion have been achieved since inception Success/achievements in 2007 Improved GFB freight flows (3 mt) – current tempo First year for a decade where volumes did not decrease Capacity created on Iron Ore and Coal Line that exceeds current demand from clients Increase in monthly port handling capacity at DCT (TEU’s 186 000 vs 158 000) Procurement savings of R500 million p.a. and reduction in safety incidents (R200 million) STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  23. Efficiency improvement: Transnet Business Intelligence projects (TBI) Implementation of TBI projects Effective use of technology, world class systems and processes Financial management and reporting Improving processes and systems that enable information management Identified KPI’s across businesses to measure key value drivers Benchmarking against international companies to ensure world class performance Implemented Key Performance Indicator project to measure: Key volume drivers KPI performance weekly/monthly Performance vs benchmarks – all areas of business STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  24. Transnet Second Defined Benefit Fund (TSDBF) Active management and leadership from Transnet Currently in surplus of R1,7 billion as opposed to being in deficit in 2006 of R1,6 billion (aided by the sale of MTN shares-M Cell and V&A Waterfront) Rule amendments approved by the Minister - Generally to enable bonus amounts to be paid to pensioners to exceed 2% pension increase (subject to affordability) Transnet paid ex-gratia bonuses of R125 million to pensioners All received an additional 1% Previously disadvantaged widows and members with >15 years service who receive low pensions and/or also over 65 years old received additional amounts STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  25. Transnet Pension Fund Act changes have received presidential approval to enable non-Transnet employees of businesses transferred to Government to remain members Rule amendments approved by Minister Fund will become multi-employer with new employers guaranteeingthe obligations of its employees and pensioners Fund now in substantial surplus (R 2.4 billion of which R 1.1 billion relates to the Transnet sub-fund) Transnet Retirement Fund Act changes have received presidential approval to enable non-Transnet employees of businesses transferred to Government to remain members Rule amendments approved by Minister STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  26. Economic Regulation National Ports Act Act in place from November 2006 Places responsibility on NPA to ensure safe, efficient and effective functioning of ports system Independent Regulator oversees NPA’s functions, approves tariffs, hears complaints and appeals from port users Transnet is investing in systems and capacities to perform additional functions prescribed by legislation Interacting with shareholder in certain aspects of Act STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  27. Economic Regulation continued Pipelines NERSA (energy regulator), declined Petronet’s application for 5,6% increase Regulations for, amongst other issues, determining tariff increases not yet finalised Transnet engaging with relevant authorities; important that tariff methodology enables Transnet to earn a fair return on invested capital (> WACC) STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE Have formed a regulation policy unit to lead Transnet’s strategy and interactions with the Regulator

  28. Risk Management Operational Risk Established a Risk Committee of the Board and appointed a Chief Risk Officer that serves on EXCO Appointed GE Human Resources and HR Sub-Committee dealing with human capital in sustaining the turnaround Improved safety measures and roll out safety awareness and training programmes Reviewed safety procedures and strengthened capacity in problematic areas Improved controls and campaign against fraud STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  29. Risk Management Financial Risk Financial Risk Framework in place covering all risks (interest, currency, market) Asset and Liability Committee ensures that financial risks are effectively managed Stringent financial objectives are set to ensure that targeted financial ratios are achieved/maintained Improved internal financial and system controls STRATEGY IMPLEMENTATION: ACHIEVEMENTS TO DATE

  30. CAPEX SPENDING FIVE-YEAR PLAN: R78 billion (continuing businesses) RAIL Freight Rail R34,8 bn • Coal Line – R4,9 bn • Ore Line – R3,8 bn • General Freight – R15,3 bn • Maintenance Capitalisation – R10,8 bn PIPELINE Pipelines R10 bn • Multi-product pipeline – R9,3 bn • Gas line upgrading – R0,2 bn * Pipelines 13% Port Terminals PORTS Port Terminals R9,5 bn • Durban – R0,9 bn • Richards Bay – R0,7 bn • Ngqura – R1,5 bn • Cape Town – R0,4 bn • Saldanha – R2,9 bn 12% Freight Rail 45% 24% PORTS NPA R18,5 bn • Richards Bay – R0,8 bn • Ngqura – R4,7 bn • Cape Town – R3,8 bn • Durban – R7,6 bn • Floating craft – R0,7 bn 5% NPA RAIL Rail Engineering R4,1 bn • Equipment - R2 bn • Upgrade of facilities – R1,1 bn Rail Engineering * Latest estimate R11.2bn

  31. CAPEX FIVE-YEAR PLAN: R78 billion* 2008 2009 2010 2011 2012 Five-year plan Pipeline and other Ports Rail Cumulative Annual spending over five years R78 bn R21.5 bn R17.5 bn R16.9 bn R12.7 bn R9.4 bn * Continuing businesses

  32. SHAREHOLDER’S COMPACT

  33. BROAD-BASED BLACK ECONOMIC EMPOWERMENT Policy: • Transnet fully endorses and supports the Government’s Broad-based Black Economic Empowerment Programme and has aligned its policies with the DTI’s Codes of Good Practice which were gazetted on 9 February 2007. (Some alignments need to take place between the DTI Codes and the DoT’s new draft Rail Transport Charter) • Transnet encourages join ventures with- and sub-contracting to BBBEE companies Achievements: • During the 2006/07 financial year, Transnet’s operating divisions spent R10.6 billion externally with suppliers, of which R3.9 billion went to broad based BEE companies, up R600 million from 2006

  34. BROAD-BASED BLACK ECONOMIC EMPOWERMENT Strategy – BBBEE going Forward: • Transnet will participate in the Rail Transport Charter workgroup to ensure alignment between the DTI- and DoT scorecards • Transnet has had most of its high-value suppliers accredited against the DTI scorecard and will continue to encourage all its tenderers / suppliers to do so • Having had itself accredited, Transnet scored 56.8 on BBBEE, equating to a “Level 5”, re- cognition level of 80%. A BBBEE Task team has subsequently been created at Transnet Corporate office to improve this score by driving strategy and coordinating all elements of the DTI Scorecard • Over and above Transnet’s BBBEE and Supplier Development strategies, we will imple- ment a plan for Competitive Supplier Development (“CSDP”) in alignment with our support of AsgiSA. This plan will consider opportunities to develop globally competitive local sup- pliers (especially from the BBBEE ranks) through various strategic initiatives

  35. All measure-ments exceeded Shareholder Compact requirements SUBSTANTIAL IMPROVEMENTS IN FINANCIAL PERFORMANCE DEMONSTRATED Transnet Performance Highlights: Three-Year View Measures 2004 Actual 2007 Actual Improvementvs 2004 Operating profit R4 750m R8 470m 78% EBITDA (%) 17% 40,7% 139% Cash interest cover 3,5 times 5,4 times 54% Cash flow return on investment (CFROI in real returns) 4,0% 6,8% 70% Gearing 83% 39% 53% Capex (excl. Aviation) R3,8 bn R11,7 bn 208% Shareholders equity R9,9 bn R37,4 bn 278% Four-point turnaround plan starting point

  36. CHRIS WELLSFINANCIAL OVERVIEW2006/07

  37. Consolidated income statement for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 GROUP FINANCIAL RESULTS: 2006/07 • Revenue growth of 8,4% • Strong volume growth from all divisions except Freight Rail

  38. for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 Net operating expenses (16 726) (15 733) GROUP FINANCIAL RESULTS: 2006/07 Consolidated income statement • Operating expenses increase by 6,3% • Operating expenses contain certain once-off costs, notably • R125 million bonus payout to TSDBF members • R100 million additional contribution to TPF • R165 million in respect of provisions • Adjusting for the above costs, operating expenses would have increased by only 3,8%, well below the inflation rate

  39. Consolidated income statement for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 Net operating expenses (16 726) (15 733) EBITDA 11 488 10 301 Revenue (R million) EBITDA (R million) SAA 768 SAA 16 339 SAA 953 SAA 17 342 10 301 28 214 26 034 8 269 6 489 11 488 23 936 27 298 25 260 7 333 GROUP FINANCIAL RESULTS: 2006/07 EBITDA increased by 12%, margin increased to 40,7% (2006: 39,6%)

  40. GROUP FINANCIAL RESULTS: 2006/07 Five-year EBITDA Margin Growth 86% growth 41 40 29 22 17

  41. for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 Net operating expenses (16 726) (15 733) EBITDA 11 488 10 301 Depreciation & amortisation (3 018) (2 163) GROUP FINANCIAL RESULTS: 2006/07 Consolidated income statement • Depreciation and amortisation for the year increased by 39,5%. • Acceleration of the capital expenditure programme and depreciation on capitalised maintenance in terms of IFRS

  42. for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 Net operating expenses (16 726) (15 733) EBITDA 11 488 10 301 Depreciation and amortisation (3 018) (2 163) Profit on sale of interest in businesses, impairment of assets, dividends received and fair value adjustments 2 189 1 105 GROUP FINANCIAL RESULTS: 2006/07 Consolidated income statement The fair value adjustments: • “C” class preference share • Increase in the carrying value of investment properties

  43. for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 Net operating expenses (16 726) (15 733) EBITDA 11 488 10 301 Depreciation and amortisation (3 018) (2 163) Profit on sale of interest in businesses, impairment of assets, dividends received and fair value adjustments 2 189 1 105 Profit from operations before net finance costs 10 659 9 243 Net finance costs (2 437) (2 406) GROUP FINANCIAL RESULTS: 2006/07 Consolidated income statement Interest cover (times) • Profit from operations before finance costs increased by 15% to R10,7 billion • Finance costs remain at similar levels to the prior year and interest cover increased to 3,5 times (2006: 3,4 times) • The Group’s WACD of 11,9% is high due to legacy debt

  44. for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 Net operating expenses (16 726) (15 733) EBITDA 11 488 10 301 Depreciation and amortisation (3 018) (2 163) Profit on sale of interest in businesses, impairment of assets, dividends received and fair value adjustments 2 189 1 105 Profit from operations before net finance costs 10 659 9 243 Net finance costs (2 437) (2 406) Taxation (1 902) (2 042) GROUP FINANCIAL RESULTS: 2006/07 Consolidated income statement • Current taxation charge of R0,9 billion and deferred taxation charge of R1,0 billion

  45. for the year ended 31 March 2007 R million 2006 R million Revenue 28 214 26 034 Net operating expenses (16 726) (15 733) EBITDA 11 488 10 301 Depreciation and amortisation (3 018) (2 163) Profit on sale of interest in businesses, impairment of assets, dividends received and fair value adjustments 2 189 1 105 Profit from operations before net finance costs 10 659 9 243 Net finance costs (2 437) (2 406) Taxation (1 902) (2 042) Income from associates 2 33 Profit for the year from continuing operations 6 322 4 828 Profit for the year from discontinued operations 1 082 102 Profit for year 7 404 4 930 EBITDA margin (%) 40,7% 39,6% GROUP FINANCIAL RESULTS: 2006/07 Consolidated income statement

  46. Consolidated balance sheet for the year ended 31 March 2007 R million 2006 R million EQUITY AND LIABILITIES Capital and Reserves 37 433 29 526 Non-current liabilities 22 832 22 189 Borrowings and provisions 18 703 17 789 Capital and Reserves (R billion) Gearing (%) GROUP FINANCIAL RESULTS: 2006/07

  47. EQUITY AND LIABILITIES Capital and Reserves 37 433 29 526 Non-current liabilities 22 832 22 189 Borrowings and provisions 18 703 17 789 Post-retirement benefit obligation 2 422 4 348 Transnet Pension Fund (a) (fully funded) – – Transnet Second Defined Benefit Fund (a) (fully funded) – 1 628 Post-retirement Medical Benefits (b) SATS Pensioners 1 369 1 607 Transnet employees 717 765 Other 336 348 GROUP FINANCIAL RESULTS: 2006/07 2006 R million 2007 R million Consolidated balance sheet for the year ended 31 March Restructuring and funding plan in progress Funding monthly including Transnet subsidy

  48. for the year ended 31 March 2007 R million 2006 R million EQUITY AND LIABILITIES Capital and Reserves 37 433 29 526 Non-current liabilities 22 832 22 189 Borrowings and provisions 18 703 17 789 Post-retirement benefit obligation 2 422 4 348 Deferred taxation 1 707 52 GROUP FINANCIAL RESULTS: 2006/07 Consolidated balance sheet • The deferred taxation liability increase in the year is due to increased temporary differences as a result of: • Capital expenditure programme • Post retirement benefit obligation • Taxation on increased carrying value of PPE recorded at fair values • Depreciation changes announced in budget speech by the Minister of Finance to reduce the taxation deprecation periods: • New rolling stock from 14 years to 5 years, • New quay wall and other port facilities to qualify for deductions over 20 years rather than non-depreciation for taxation purposes

  49. for the year ended 31 March 2007 R million 2006 R million EQUITY AND LIABILITIES Capital and Reserves 37 433 29 526 Non-current liabilities 22 832 22 189 Borrowings and provisions 18 703 17 789 Post-retirement benefit obligation 2 422 4 348 Deferred taxation 1 707 52 Current liabilities 16 989 26 631 Payables and other 16 559 13 699 Liabilities classified as held-for-sale 430 12 932 TOTAL EQUITY AND LIABILITIES 77 254 78 346 GROUP FINANCIAL RESULTS: 2006/07 Consolidated balance sheet

  50. 2007 R million 2006 R million Consolidated balance sheet for the year ended 31 March ASSETS Non-current assets 57 843 50 144 PPE and other 57 720 48 125 Long term loans and advances 123 2 019 CURRENT ASSETS 19 411 28 202 Inventory, receivable assets and cash 9 841 7 588 Derivative financial assets 5 658 3 874 Assets classified as held-for-sale 3 912 16 740 TOTAL ASSETS 77 254 78 346 Return on average total assets (%) GROUP FINANCIAL RESULTS: 2006/07

More Related