SABC Annual Results Presentation 5 November 2004

1
SABC Annual Results Presentation5 November 2004

• The public broadcaster
• Delivering social and financial value

2
What a year!

• A year of tremendous achievements for South
  Africa
• For SABC viewers and listeners, world-class
  coverage of
• Elections 2004
• Decade of Democracy Celebrations
• Pan-African Parliament
• South Africas 2010 Bid
• World Cup Rugby
• World Cup Cricket
• And more recently
• Olympics 2004

3
What a year!

• For the SABC itself
• Strong delivery on public service mandate,
  exceeding targets for language diversity and
  local content
• Solid financial performance
• Recognition from domestic and international
  peers, with over 120 awards for excellence
• In a nutshell We have succeeded in meeting the
  triple bottom line in terms of economic, social
  and environmental value

4
Overview
Section 1 Introduction Eddie
Funde Chairperson of the Board Section 2
Review of performance Peter Matlare Group
CEO Section 3 Review of services Peter Matla
re Group CEO Section 4 Financial
results Robin Nicholson Chief Financial
Officer
5
Section 1Introduction

• Eddie Funde
• Chairperson of the Board

6
Chairpersons statement

• Building on achievements of the previous board
• Challenges included
• Corporatisation process
• Introduction of new editorial policies, including
  compliance with language mandate
• Ensuring regulatory compliance, including
  submission of licence renewals and amendments,
  and regional TV licences applications

7
SABC Goals

• Critical that SABC continues to be in a position
  to deliver on its commercial and public service
  mandates
• The Board has set specific goals going forward to
  build a world-class public broadcaster

8
SABC Goals

• This means creating an SABC that enjoys the
  support and respect of its shareholder, viewers,
  listeners as well as other stakeholders
• Promoting democracy, national unity, (national
  consciousness) non-racialism, non-sexism and
  empowerment.
• Align the Charter, company objectives and
  editorial policies.
• Create a financially sound company built on a
  sustainable model enabling it to fulfill its
  mandate.
• Revitalising the company, particularly news and
  making it a preferred employer of choice.
• Ensuring compelling and professional programming
• Full regulatory compliance.
• Continuous evaluation and monitoring to ensure
  alignment with the broadcasting act and its own
  editorial policies.

9
Resourcing

• Board will continue to ensure investments that
  deliver social and financial returns
• This will require combination of funding
• Licences
• Commercial revenues
• Public funding

10
Going forward

• New board has clearly defined what needs to be
  achieved in next year and the years going
  forward.
• Building a strong team of board and management
• Ensuring the SABC is a caring organisation
• Ensuring good governance, accountability,
  editorial independence based on accurate balanced
  reporting and compliance.
• Ensuring continued stakeholder involvement and
  public participation
• Contributing to a South Africa that is based on
  the values contained in the Constitution

11
Section 2Review of performance

• Peter Matlare
• Group Chief Executive Officer

12
The strategy

• Stabilising the SABC
• People
• Revenues
• Costs
• Striving for best practise
• Implementing the Act
• World class operations
• People and success behaviours
• World class content and brands

13
The strategy

• From non-core to core business
• Focus on local content
• Focus on industry development
• Focus on talent development
• Focus on technology investment

14
Our performance

• SABC uses a balanced scorecard for measuring
  performance
• National priorities and mandate
• Universal service and access
• Local content
• Growth and financial health
• Innovation, customers and stakeholders
• People and success behaviour

15
Growth and financial health

• Revenue increased by 11 to R 2.7-billion
• TV revenue grew 14
• Radio revenue grew 18
• License revenue grew 10
• EBITDA improved by R11-million
• Cash flow from operations up R236-million

16
Growth and financial health

• Expenditure on local content up R 218-million
  (27.6)
• Foreign content down R49-million (21)
• Total investment in local content R 1,007-bn
• Growth in cost contained to 6.8
• Personnel cost growth 9
• Facilities cost growth zero
• Signal distribution 6

17
Public Service highlights

• News on TV in 11 languages
• Educational TV broadcasts increased by 20
• Language delivery other than English from 25 to
  34
• Increased delivery of sports of national interest
  and minority sports

18
Compliance

• Corporatisation completed
• Re-organisation completed
• Licences renewed
• Regional licences applied for

19
Universal Service and Technology
20
Delivering Services

• Radio has remained at current level of access --
  however we have applied for expanded transmitters
  that would improve coverage as follows
• Radio 815 000
• Television 583 000

21
Technology

• Critical in ensuring SABC can meet its mandate
• Four business imperatives for 2004
• Operational excellence
• Cash efficiencies
• Development of skills and talent
• Increase in delivery success
• Investment during this period R103,9-million.

22
Innovation Customers and Stakeholders
23
Stakeholders

• Improved access for audiences
• Refocused audiences services
• Extensive consultation on editorial policies
• Effective participation on public hearings
• Key social initiatives with government.
• 16 Days
• HIV and Aids
• Educational programming

24
Stakeholders

• Key partnerships with civil society
• Community builder of the year
• Literacy programmes
• Support for cultural activities
• North Sea Jazz
• Macufe
• Klein Karoo
• Fidelio

25
Customers

• Improved relations with marketing industry
• Launch of the Your SABC campaign
• Launch of the Ya Mampela brand
• SABC 2s Feel at Home
• SABC 3 Much Better
• On radio we have seen Metro, 5 FM, RSG, SAFM and
  Good Hope all create exciting offerings

26
Customers

• Launch of Consumer Scope
• Launch of Future fact
• Introduction of the SABC People Panel
• Focus on music research
• Strong relationship with SAARF

27
People and Success Behaviours
28
1. Investing in our industry

• SABC continues to invest heavily in local
  production industry, to increase the sectors
  capacity and develop talent
• Significant investments in productions on all
  three TV channels
• More than 4 000 freelance contractors employed
• Commissioned 247 productions, at a cost of
  R319-million
• Specific focus on black-owned companies, to
  facilitate empowerment

29
2. Human capital

• Our people are at the centre of our success
• Human capital investment continues
• Performance management
• New system put in place
• Align business strategies with performance
• Drive performance in strategic areas
• Employment equity
• No. of black people on staff increased from 58
  to 60
• No. of women on staff increased from 39 to 40

30
Human capital

• Training and development
• 4 592 trainees this year (61 black) an
  all-time high
• Support for employees affected by HIV/AIDS
• HIV/AIDS strategy developed after extensive
  research and consultation
• Labour relations initiatives
• Collective agreement signed with Mwasa
• Similar agreement being developed with Bemawu
• 195 shop stewards completed training in
  disciplinary hearings

31
3. Awards and achievements

• More than 120 awards for SABC journalists and
  staff
• TV awards on all three levels
• CNN World Report (global)
• CNN African Journalist of the Year (African)
• Vodacom Journalist of the Year
• A range of other awards for excellence
• Radio awards acknowledged excellence in
  reporting, contributions to language diversity,
  sport, news and economic growth
• Educational programmes received international
  recognition

32
Section 3Review of services

• Peter Matlare
• Group CEO

33

Introduction

• Another significant year for SABC radio and
  television
• Great strides made on the path towards the
  transformation of the SABC into a true public
  broadcaster
• Success of our programming and scheduling
  strategies confirmed

34

Introduction

• SABC radio and television remain dominant in
  South African broadcasting
• Exceeding new local content regulations
  introduced by ICASA in August 2003
• Establishment of Content Enterprises to improve
  management of the content of SABC services

35

Public broadcasting performance

• PBS Re-building Radio Project launched to take
  portfolio forward focused on people and content
• Key outputs re-investment in drama, radio news
  and current affairs, and music
• This investment is what has underpinned excellent
  performance of this portfolio this year

36

Public Broadcasting performance

• Local music quota for PBS radio was increased to
  40 in August 2003
• PBS radio continued to perform well above the
  minimum quota

37

PBS Television

• PBS Television channels repositioned and
  dedicated to public broadcasting, in terms of
  Broadcasting Act
• SABC1 and SABC2 maintained prime time audience
  dominance of television market
• Delivery on local content increased on both PBS
  channels in line with new ICASA quotas introduced
  late 2003

38

PBS Television

• Language delivery expanded with introduction of
  news bulletins in siSwati, isiNdebele, xiTsonga
  and tshiVenda. Increased programming in SA Sign
  Language and use of subtitles
• SABC 1 programme offering defined by celebrating
  the freedom to engage real issues. Consolidated
  its position as the nations number 1 channel,
  reaching 88 of potential viewers
• SABC 2 programmes that truly reflect the
  multifaceted nature of the South African family.
  Rapidly re-establishing itself as the nations
  number 2 channel, reaching 90 of potential
  viewers

39

Investment in local content

• Increased investment in local content of
  R132-m, as part of continued focus on local
  industry, has delivered award-winning
  programming
• Radio drama and documentaries
• Television drama and documentaries
• Showcasing events of national importance

40

PCS Radio

• Radio stations in SABCs commercial service
  portfolio offer programmes and services that are
  in keeping with the principles of public
  broadcasting
• Metro FM continues to grow brand presence and
  audience, with over 6-million listeners
• Significant investment in 5FM, leading to 13
  growth in audience
• Tighter focus on Goodhope FM, to address
  challenges

41

PCS Television

• As a commercial channel, SABC 3 prides itself on
  bringing viewers a fusion of the best of local
  with the best of international programmes
• Exceeded its local content quota and delivered
  quality local content, eg. Isidingo
• Introduction of South Africas first daily talk
  show, 3-Talk
• Moving news to 7pm has ensured its position as
  the most-watched English news bulletin

42

News and current affairs

• News content informed by editorial policies
• Special focus on elections through Current
  Affairs slots on radio and television, resulting
  in accolades from key stakeholders
• Programmes aimed at reflecting a country in
  transition and marking the first Decade of
  Democracy
• All television Current Affairs shows tackled the
  key election campaign issues, such as
  unemployment, HIV/Aids and crime

43

News and Current Affairs

• Radio News and Current Affairs
• Extended Current Affairs programmes on SAfm
• Production of iPhalamente on Ukhozi FM
• Television News and Current Affairs
• For the first time ever, television bulletins in
  siSwati, isiNdebele, xiTsonga and tshiVenda
• Asikhulume, a Nguni weekly Current Affairs show
  was introduced on SABC 1 and immediately
  established itself as the biggest Current Affairs
  show in South Africa

44

SABC Africa

• SABC Africa leading broadcaster of African
  programmes in the DSTV bouquet
• 180 Degrees in Africa
• 60 Minutes Live
• Live coverage of key events such as inauguration
  of Pan African Parliament
• Entertainment on SABC Africa continued to cross
  borders with top quality African films in English
  and French

45

Education

• Increased delivery broadcast minutes up 20
• Established itself as a world leader in dramatic
  edutainment
• Has earned an enviable reputation for excellence
  in the production and delivery of educational
  material
• This development has attracted an impressive list
  of funders, sponsors and stakeholders

46

Religion

• Continued to reflect diversity of faiths in South
  Africa
• The Big Question an interactive magazine show on
  SABC 2
• The Chatroom a multifaith youth morality show
• HIV/Aids awareness campaign
• National Transformation Day of Prayer
• Bayethe Jesu

47

Sport

• Continued increased investment in domestic
  soccer, cricket, rugby and minority sports, plus
  premier events
• 2010 bid matches/bid
• All Africa Games 2003
• Rugby World Cup 2003
• Presidents Cup golf
• Africa Cup of Nations 2004
• Number of future contracts secured

48
Section 4Financial outcomes

• Robin Nicholson
• Chief Financial Officer

49
Key financial imperatives

• Sustainable financial outcomes within the context
  of the SABCs mixed funding model
• Strategic and deliberate focus on the funding of
  core activities of the SABC
• The funding of programming including news
• The provision and distribution of broadcasting
  services
• The technologies and facilities that support
  broadcasting activities of the SABC
• Modernisation of the organisations financial
  management and systems

50
Highlights

• The corporation remained largely self-funded (97
  of revenue from SABC activities)
• Revenue sources increased by 11
• TV revenue grew by 14
• Radio revenue grew by 18
• Non core revenues declined in line with
  expectations
• TV license revenue grew by 10
• Costs remained contained
• Programme and broadcast costs grew by 6
• Personnel remuneration (excl. PRMA) grew by 7
• News costs grew by 9 in total
• Sport costs grew by 17 in total
• Facilities costs remained constant
• Contribution from TV improved by R128m
• Contribution from Radio improved by R66m
• An overall improvement of R151m from a loss of
  R148m to a profit of R3,4m

51
Income Statements
52
Revenue analysis
53
Drivers of growth

• Audience performance
• Sales focus
• Delivering value for advertisers
• TV licence increase assisted growth in last
  quarter
• TV licence growth driven through collection
  efficiency and new regulations

54
Segmental analysis

• Primary segment reflects the separation required
  by the Broadcast Act
• The secondary segment represent the media and
  platform segmentation
• Clearly overlap in the segments and analysis

55
Segmental analysis
56
Primary segments PBS and CBS

• Growth in PBS driven by both Radio and TV
• CBS improved contribution to PBS through improved
  profitability
• PBS content cost grew in line with focused
  delivery. Increased by R64m
• Investments in News, Sport and Education content
  grew by R132m
• Facility costs remained constant with prior year
  but with increased internal utilisation

57
Secondary segmentation
58
Secondary segmentation

• Televisions contribution grew by R127m and used
  to support News, Education and Sport
• Radio increased the contribution to the group by
  R66m
• The PBS stations showed exceptional growth in
  revenue in the year with some reporting growth in
  excess of 26
• Other costs include provisions for
  Post-retirement Medical contributions of R7m
  charged v R76m release in prior year distorting
  the prior year comparative
• Like for like prior year was R427m this year
  R414m

59
Cost growth excluding PRMA
60
Costs

• Below revenue growth resulting in improved
  margins
• Central costs remain a focus and will only be
  contained once appropriate technology changes
  take place

61
Investment income

• Lower cash holding over the course of the year
  due to Bop funding
• 600 basis point decline also impacted
• Cash used to support core operations not the
  income statement

62
Balance sheet
63
Working capital management

• Saw growth in current assets as new programmes
  grew inventory
• Trade receivables grew in line with revenues
• Cash and cash investments slightly better than
  the prior year reflecting the focus on assets
  management
• Accounts payable increased significantly with
  rights payments due to Olympics and 2006 World Cup

64
Financial statements
65
Financial statements
66
Cash flow statement

• Cash flow from operations improved
• Cash generated from operations improved by R237 m
  moving from a deficit of R152m to a positive cash
  flow of R85 m
• Investment in capital replacement was R104m,
  including support for the technology renewal
  programme
• Cash and near cash maintained

67
End