ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

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


Audit Committee:Controls:

Internal Audit External Audit

Financial MattersManagement AccountsInvestmentsFinancial Policies


Risk Management Committee:

Annual Risk Assessment

Risk Management – mitigating risks


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


500261.66 33


264487.66 94


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


66 28 42 52 2


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


6 12 3 5 0 3 21 20 34 38 1


41 42 1 2 2 29 27 71 74 5 5


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,


superintended

Skilled technicaland acedemicallyqualified workers,


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 - - 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 - - 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


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


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


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


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


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


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


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

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