3rd QUARTER REPORT

FOR YEAR ENDING MARCH 31 2015

PORTFOLIO COMMITTEE ON TELECOMMUNICATIONS AND POSTAL SERVICES

17 MARCH 2015

CONTENTS

1.PERFORMANCE OVERVIEW

2.PRE-DETERMINED OBJECTIVES

3.PROFITABILITY PER SERVICE

4.FINANCIAL STATEMENTS

5.CAPITAL EXPENDITURE

6.HUMAN RESOURCES

7.CORPORATE GOVERNANCE

Performance Overview

3

SENTECH is pleased to present the results for the Q3 that ended December 2014 to the Department of Telecommunications and Postal Services.

Overall Performance

Pre-Determined Objectives

4

SENTECH is pleased to present the results for the Q3 that ended December 2014 to the Department of Telecommunications and Postal Services.

Overall Performance

Pre-Determined Objectives (Non-performance)

KPIAnnual Target

YTDQuarter Variance Explanation

Target Actual

Number of VSAT terminals installed

135 9039 (Ethniks 38,

Centlec 1,)

One of the key solutions driving this target is the roll out of the Ka Band frequency which is currently not yet completed. A process to provide VSAT terminals to community broadcasters is currently underway and is expected to be completed by March 2015.

Number of public sector ICT infrastructure services

installed/enabled through CSI programme

14 9 7A listing of additional schools has been received from DTPS. An implementation plan is in place to install VSAT at the remaining schools.

Customer and stakeholder service index

Baseline + 5%

Baseline + 5%No performance

conducted

The focus during this quarter was on implementing the recommendations from the previous survey. The procurement process is currently underway to appoint a service provider to perform the survey in the current financial year. This process is expected to be completed by March 2015.

Percentage of training implementation plan achieved

(Interventions to address identified critical skills gaps)

80% 60% 50.90%

The reasons for the variance include, the postponement of certain courses as well as delayed procurement. A dedicated resource to assist with the finalisation of the procurement ( requisitions and follow up on purchase orders) as well as scheduling of training has been appointed in November. The scheduled training interventions will be monitored on a weekly basis to ensure the achievement of the annual target.

5

Profitability Per Service (Year-to-date)

6

Television

Radio

DTH

Rental

VSAT

There was positive growth of 2% above budget: •Establishment revenue of 2 Low Power sites namely Makgaung and Ga Mafefe.•Successful DTT rate card negotiations with MNET, e.tv and TBN.

• FM, MW & SW have realised revenues above budget for the YTD.• However, as reported in previous quarters, FM is experiencing challenges on 3rd Party site

acquisition and has impacted the delivery schedules for community broadcasters.There has been an improvement on DTH with the following customers launched in Q3:•Multichoice contracted 70 Mbs, Teach Every Nation (TEN) and Enlightened Christian Gathering (ECG) TV launched their new services.Revenue is 22% below budget on a YTD basis.•A new facility rentals’ tariff was approved and discussed with Cell C, Vodacom, Comsol and Netstar .

VSAT is slightly above budget with less than budgeted losses reported due to the following:•Mainly the budgeted cancellation of the KZN DoE did not materialise.

TV FM MW SW DTHFacility Rental VSAT

R'000Revenue (401 064) (177 964) (6 581) (20 092) (70 718) (39 146) (9 440) Cost of Sales 130 053 97 092 6 453 17 433 107 612 9 899 22 171 Gross Profit (271 011) (80 872) (128) (2 659) 36 894 (29 247) 12 731

Overheads 96 550 48 827 2 224 5 675 18 273 9 135 4 092 Operating expenses 23 247 14 102 618 1 147 4 385 2 096 1 248 Administrative expenses 70 732 32 918 1 337 4 313 12 684 6 640 1 988 Selling expenses 2 571 1 807 269 215 1 204 400 856

Earnings before interest & tax (174 460) (32 045) 2 097 3 016 55 167 (20 111) 16 823

7

Financial Statements Statement of Comprehensive Income and Ratio Analysis

Statement of Comprehensive Income (R’000) summarised:

Variance Analysis

•The positive performance on EBIT was driven by:

o Once-off recoveries of Mandela funeral costs and DTT Dual illumination costs; and

o lower than expected operational expenditure primarily driven by:

lower spend on discretionary cost items, such as professional and consulting, corporate

communication.

•As a result of the improved EBIT, the annualised Return on Net Assets (RONA) as at Q3 FY2015 is projected at

12.82% against a target of 6%.

GRANT Funds - CAPEX Report

8

DTT sites launched during Q3:Kuruman Hills – 14 October 2014Springbok – 30 October 2014Garies – 31 October 2014Upington – 18 November 2014Upington Town – 5 December 2014Piet Retief – 12 December 2014De Aar – 18 December 2014Pomfret – 18 December 2014

83.62%Population covered

53.89%Geography covered

DTT Project Status Report – 27 February 2015

9

    Existing Sites   Greenfield sites

Province   Total Complete In Progress % Completed

  

Free State   13 13 -   100%   1 Harrismith

Gauteng   12 12 -   100%      

Kwazulu Natal   29 29 -   100%      

Limpopo   10 10 -   100%   1 Burgersfort

Mpumalanga   13 13 -   100%      

North West   16 16 -   100%      

Eastern Cape 

33 33 - 100% 

2Holy Cross

    Ngqeleni

Northern Cape   17 17 - 100%      

Western Cape   35 34 1 Napier 97.1%      

Total   178 177 1   99.4%   4  

HUMAN RESOURCES Headcount and ResourcingThe graph reflects staff complement against the approved

●17 appointments were made (internally and externally) of which 88% are black and 41% were black females.

10

Staff Turnover

Sentech’s turnover rate for Q3 was 1.9%,

comprising 0.9% resignations and 1%

involuntary terminations (death/retire). Only 1

black female resigned during the quarter.

Skills development

Cumulative achievement of 50.5% of the annual target of

1664 planned interventions was achieved compared to the

38% achievement in the previous quarter.

Corporate Governance – Audit Outcome & Progress

Audit Outcome

Bilateral meeting with the Minister

Progress on administrative matters in FY2014

●Management developed an Audit Action Plan addressing all admin issues.

●EXCO monitors Audit Action Plans – Monthly basis.

●Audit Committee monitors progress on a quarterly basis.

11

FY2010 FY2011 FY2012 FY2013 FY2014Qualified opinion

Unqualified (with other matters)

Unqualified (with other matters)

Unqualified (Clean)

Unqualified (Clean)

SENTECH SOC LimitedSENTECH SOC Limited