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Group overview Strategy 2013/14 to 2015/16

Group overview Strategy 2013/14 to 2015/16. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14. Contents. Official signoff Foreword by the Chairperson of the Board Overview by the Group Chief Executive Officer Vision, Mission and Values

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Group overview Strategy 2013/14 to 2015/16

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  1. Group overview Strategy 2013/14 to 2015/16

  2. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  3. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Annexure A: HR Plan • Annexure B: Communication plan • Annexure C: Fraud prevention plan • Annexure D:Corporate social investment plan • Annexure E: Green/environmental strategy • Annexure F: Governance frameworks • Annexure G: Risk management • Annexure H: Glossary • Annexure I: List of products and services • Annexure J: Strategic programs • Annexure K: Executive profile • Annexure L: Board of Directors profile • Annexure M: Bibliography and acknowledgements

  4. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  5. Official signoff Please refer to page 1 of the Corporate and Annual Performance Plan 2013/14. Mr Mothema has subsequent to the submission on 28 Feb 2013, sign-off and the printed booklet will reflect his signature

  6. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  7. Foreword by the Chairman of the Board • Volatility of global and local economy • National development plan • SA Post Office’s corporate plan re-inforces the goals and priorities of government • SA Post Office primary interface between government and the consumer • Support and play key role in the digital migration project • Support and promote small businesses and entrepreneurs • Continue to invest into our human capital • Drive the Postbank Corporatisation journey • Defines 6 themes that drives the strategy • Ensure delivery through clearly defined pre-determined deliverables

  8. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  9. Overview by the Group Chief Executive Officer • Mail continues to be the biggest contributor, however, technology evolution will force innovation • Challenge continue to be agile enough to meet various mandates • Business must be self-reliant and self sustainable • Embrace technology to deliver services more efficiently to our customers • Single minded and focused delivery of the defined programs of work • Significantly invest in our people to enable them to deliver the strategy • Strategy provides a roadmap for diversification • Improve levels of governance • Customer will be the centre of everything we do • Intend to deliver value to Shareholder and our other Stakeholders

  10. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  11. Vision and mission • VISION • To be recognised among the leading providers of postal and related services in the world. • MISSION • We will enable the nation to efficiently connect with the world by distributing information, goods, financial and government services; leveraging our broad reach and embracing change, technology and innovation • VALUES • We have a passion for our customers and will meet their specific needs through excellent service • We aim to contribute positively to our communities and environment • We treat each other with respect, dignity, honesty and integrity • We recognise and reward individual contributions • We embrace diversity in the way we conduct business

  12. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  13. Overview of Group

  14. Overview of Business Units • The Mail Business portfolio comprises six core divisions: • Mail Processing; • Delivery Management; • Transport & Logistics; • International Business; • Securemail and • Philately. This E-BusinessUnit will operate as a Business Communication and Transaction solution provider focusing on the electronic fulfilment of communications and transactions through multiple delivery channels such as Hybrid Mail, Mobile, Internet, ICT and self-service channels. Trust and Identity Management solutions will provide the required security and authentication services. The physical post office branches are the traditional channels used by the SA Post Office in delivering its products and services to the public. The Retail Channel is made up of 2454 outlets countrywide with 5792 counters Logistics (incl CFG and Docex) is the SA Post Office’s business unit offering logistics solutions. Express courier, freight, container and value-added services are fully integrated with the objective of optimising logistics within the business. The Logistics business currently delivers to more than 200 international and 3000 domestic destinations. • Postbank’s primary function is to support Government’s objective of providing affordable banking services to all citizens that need these services. It is through the post office expansive nationwide network that Postbank will be able to provide the following services • Consumer Banking • Facilitated Lending • Insurance Based on its business model, the SA Post Office will continue to operate support services on two tiers. Firstly, Corporate Services (professional services) that are responsible for Strategic direction, corporate governance, policy and procedures of the Group and secondly Shared/Support Services that are responsible for the management and provision of transactions that are repetitive by nature, to the Group.

  15. Operating principles • The group works within the following key operating principles that guides its approach to its business operations and strategic planning: • Permanent workforce supplemented by a flexible workforce depending on seasonal fluctuations • Operates with a licence agreement for reserved services • Adhere to USO targets as published every 3 years • Receive no funding for USO services • Pay a yearly licence fee to ICASA • No cross-subsidiation, work on transfer pricing model • Operates within an approved delegation framework of authority as well as materiality and significance framework

  16. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  17. Influence of the macro-environment Political Economic Social • Government mandate versus commercial sustainability • Impact of USO funding on sustainability • Governments expectation to reduce unemployment/create jobs • Ability to extract value whilst economy is flat • Ability to attract and retain new customers due to perceived stability • E-commerce growth as a driver to parcel revenue • Fuel cost fluctuations • Huge innovation opportunities •  Increase in urbanisation by 2020 •  Difficulty in managing reputation with growth in social media • High public expectations from SOE’s • High demand from customers for converge services • The need for emphasis on international labour standards and ‘decent’ work advocated by the ILO Legal Technology Environment • Legislative impact which includes: • PFMA and regulations • Companies Act • Customer Protection Act • Postbank Act • BCEA • E-tolling • BBEEE and PPFA • FAIS, FAISA • International law • AARTO • Ability to keep up with latest innovation and ICT convergence • Slow technology adoption rate • Cost of compliance • Ability and pressure to meet targets • Perception of post as being environmentally unfriendly

  18. Effect of industry issues • COMPETITORS • Entry of competitors in the reserved area • Low barriers to entry in the logistics services • Strong brands of competitors COMPETITIVE RIVARY IN INDUSTRY  Strong competitive industry in all business units • CUSTOMERS • Alternative/ substitute products, services and channels provides customers with more options • Ability to switch becomes easier • Pricing of electronic products and services relatively more affordable • SUBSITUTE PRODUCTS • Growth of e-communication and services • Customer loyalty to big brands • SUPPPLIERS • Supplier disinterest to bid • Vertical integration • GOVERNMENT • The license agreement and mandate and the ability to fund whilst ensuring sustainability

  19. Internal environment analysis These shortcomings as identified in the internal environment has been assessed and key programs of work will be implemented to address them

  20. SWOT analysis Strengths Weaknesses • Extensive customer interface points of presence • Large numbers of customers in key segments • Reputable (Recognised) brand with heritage • Mail delivery exclusivity • Government as Shareholder • Infrastructure readiness to support innovation and operational excellence • Fragmented sub-optimal product offering • Business agility • Segmented business operational model • Lack of agility due to protracted decision making processes • Misalignment between business skill and business objectives • High fixed costs Threats Opportunities • Corporatisation of Postbank • Collaborative business partnerships for revenue generation • E-based business solutions • Enhancement of government and cross border business • Growth of new non traditional business • Customer intelligence to create revenue opportunities • Loss of exclusivity • Possible non-compliance due to complex regulatory environment • Competition in the traditional markets • Increasing USO cost, loss of subsidy and license requirements • Threat of new entrants into reserved areas e.g. digital technology convergence

  21. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  22. International Postal Trends Maximising the efficiency and effectiveness of existing processes, systems and performance systems The introduction of new products and services designed to respond to the needs of a demanding market Entering new lines of business through investment in new capabilities, partnerships and acquisitions Expanding and capturing business opportunities beyond local borders

  23. Benchmarking with International Postal operators Various elements are rated individually and scored in terms of overall performance. The South African Post Office’s overall position has increased by one.

  24. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  25. Strategic imperative of mandate • Maintain financial sustainability • Position SAPO to be the delivery arm of Government Services • Delivery to all household on an equitable basis and achieve delivery standard targets of 95% • Increase public’s access to postal services with an additional address target of 1 195 690 for 2012/13 • Reposition the branch network inline with multi-channel strategy • Increase access to financial services through Postbank • Appropriate human resource management and practices including flexible labour • Focussing on consolidation, diversification, innovation and growth • Meet shareholder’s expectation of affordable & effective postal service • Manage and report responsibly applying triple bottom line (profit, people, planet)

  26. Licence Agreement Licence agreement • Universal Postal Services • Extend basic letter service to all under-services areas at charges approved by the Authority • Provide mail collection points • Provide virtual addresses where no box facilities • Ensure sufficient Retail outlets to mail basic letters and other postal items • Improve performance standards • Sell postage stamps • Accept and deliver COD items, insured parcels, ordinary parcels, registered letters and SOD • Issue and pay money orders • Must render reserved postal services by way of vending machines or other devices

  27. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  28. 5 Year Strategy

  29. Critical Success Factors

  30. SAPO’S Strategic Goals

  31. Executing strategies

  32. Executing strategies

  33. Executing strategies

  34. Executing strategies

  35. Executing strategies

  36. Executing strategies

  37. Executing strategies

  38. Executing strategies

  39. Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14 • Contents • Official signoff • Foreword by the Chairperson of the Board • Overview by the Group Chief Executive Officer • Vision, Mission and Values • Overview of the South African Post Office • Strategic overview of the postal environment • International analysis • Mandate, regulation and license • Strategy for 2013/14 to 2015/16 • Financial plan • Annual performance

  40. Sapo group (2014 – 2018) income statement – forecast

  41. Sapo group (2014 – 2018) balance sheet – forecast

  42. Sapo group (2014 – 2018) cash flow – forecast

  43. Sapo group (2014 – 2016) capex funding requirements • Group Capex Funding Requirements amounts to R4.6bn including management initiatves to turn around the organization • Excluding Postbank corporatization requirements Capex funding requirements amount to R1,6bn. • The Group does not have the ability to fund the Postbank corporatization requirements.

  44. Sapo group net profit (2008 – 2018) before initiatives – September 2012 Before cost optimisation and initiatives Budget 2013 R59m net profit • Initial forecast was a net loss of R272.5m against a budgeted net profit of R59m. • Poor performed resulted from: • Loss of SASSA social grant business. • Customer consolidation resulting in the decline in mail postings. • Postbank fee and interest shortfall. • Strike action and property costs. • Cost containment and optimisation initiatives implemented.

  45. Sapo group net profit (2008 – 2018) before interventions

  46. Sapo group net profit (2008 – 2018) after intervention

  47. Sapo group (2008 – 2018) cost structure • Operating costs forecasted to outpace revenue from 2013 until 2016. • Labour, transport and property costs create a fixed cost structure of approximately 75%. Excludes impact of interest

  48. Impact of initiatives 2012/13 R272m Initial Loss R168m Initial Loss R136m Forecasted Loss R104m Optimisation R32m Further value Value derived through cost optimisation and initiatives R136m

  49. Sapo group net profit (2008 – 2018) after intervention – November 2012 • Revenue remains depressed. • Cost optimization to match low revenues. • Net position for 2013 forecasted at a loss of R136.8m Positive impact to bottom line R136m improvement

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