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Condensed Consolidated Interim Financial Statements - RW21
RAND WATER BOARD
INSTRUMENT CODE: BIRW
ISIN: ZAG4085523
SHORT NAME: RW21
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED 31 DECEMBER 2012
DATED: 2 MAY 2013
Notes 31 Dec 31 Dec 30 Jun
2012 2011 2012
Reviewed Reviewed Audited
In thousands of Rands
Assets
Non-current assets 9 570 898 7 742 485 8 600 071
Property, plant and equipment 5 9 073 521 7 559 845 8 416 988
Intangible assets 175 169 180 701 180 765
Investment 7 320 263 - -
Loans receivable 1 945 1 939 2 318
Current assets 1 380 449 1 657 379 2 364 170
Inventories 172 197 56 804 176 360
Trade and other receivables 867 326 778 511 853 661
Current tax receivable - 3 107 3 107
Loans receivable 3 084 4 022 3 570
Cash and cash equivalents 337 842 814 935 1 327 472
Assets of disposal groups 8 1 443 1 355 1 335
T ota l ass et s 10 952 790 9 401 219 10 965 576
Equity and liabilities
Eq u it y 8 170 703 7 220 981 7 534 364
Accumulated reserves 8 173 545 7 221 350 7 534 579
Other reserves (2 842) (369) (215)
No n-c ur ren t liab ilit ie s 1 483 452 815 441 1 427 884
Interest bearing borrowings 9 984 982 439 123 984 639
Income received in advance 145 118 91 932 102 365
Provision for rehabilitation costs 48 752 - 47 080
Retirement benefit obligation 10 304 600 284 386 293 800
Current liabilities 1 296 763 1 363 304 2 001 596
Trade and other payables 1 296 763 1 155 076 1 793 368
Current portion of interest bearing
borrowings 9 - 208 228 208 228
Liabilities of disposal groups 8 1 872 1 493 1 732
Total equity and liabilities 10 952 790 9 401 219 10 965 576
Notes 6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2012 2011 2012
Reviewed Reviewed Audited
In thousands of Rands
Continuing operations
Revenue 3 828 472 3 411 295 6 838 493
Water purchased (2 991
(1 597 439) (1 471 933) 700)
Other cost of sales - - (675)
Gross income 2 231 033 1 939 362 3 846 118
Other operating income 155 288 71 051 250 135
Staff costs (1 276
(615 867) (545 152) 498)
Energy (1 147
(684 263) (571 529) 571)
Depreciation (100 055) (90 126) (198 433)
Amortisation (5 850) (6 500) (13 477)
Chemicals (83 964) (141 664) (254 343)
Operating expenses (278 633) (199 594) (469 778)
Operating profit 617 689 455 848 736 153
Finance income 23 294 23 308 46 971
Finance expense (2 017) (14 002) (4 338)
Profit before taxation 638 966 465 154 778 786
Taxation - - -
Profit from continuing operations 638 966 465 154 778 786
Discontinued operations
Profit/(loss) for the period from
discontinuing operations 8 - 101 (302)
Profit the per iod 638 966 465 255 778 484
Profit for the period from
continuing operations 638 966 465 154 778 786
Profit/( loss ) for the period f rom 8
discontinuing operations - 101 (302)
Profit the period 638 966 465 255 778 484
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2012 2011 2012
Reviewed Reviewed Audited
In thousands of Rands
Profit for the period 638 966 465 255 778 484
Other comprehensive income:
Available for sale financial assets
adjustments (2 533) (425) (6)
Exchange differences on translating foreign
operations (94) (160) (425)
Other comprehensive income for the
period net of taxation (2 627) (585) (431)
Total comprehensive income 636 339 464 670 778 053
Fair value
adjustment
Foreign assets –
currency available
translatio for sale Total Accumulated Total
n reserve reserve reserves reserves Equity
In thousands of Rands
Balance at 1 July 2011 (209) 425 216 6 756 095 6 756 311
Changes in equity
Total comprehensive income
for the six month period (160) (425) (585) 465 255 464 670
Total changes (160) (425) (585) 465 255 464 670
Balance at 31 December
2011 (369) - (369) 7 221 350 7 220 981
Balance at 1 July 2011 (209) 425 216 6 756 095 6 756 311
Changes in equity
Total comprehensive income
for the twelve month period (6) (425) (431) 778 484 778 053
Total changes (6) (425) (431) 778 484 778 053
Balance at 30 June 2012 (215) - (215) 7 534 579 7 534 364
Balance at 1 July 2012 (215) - (215) 7 534 579 7 534 364
Changes in equity
Total comprehensive income
for the six month period (94) (2 533) (2 627) 638 966 636 339
Total changes (94) (2 533) (2 627) 638 966 636 339
Balance at 31 December
2012 (309) (2 533) (2 842) 8 173 545 8 170 703
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2012 2011 2012
Reviewed Reviewed Audited
In thousands of Rands
Cash flows from operating
activities
Cash receipts from customers 3 840 771 3 340 997 6 693 045
Cash paid to suppliers and employees (3 567 987) (3 012 369) (5 496 789)
Cash generated from operations 272 784 328 628 1 196 256
Finance income 23 294 23 308 46 971
Finance expense (50 802) (36 986) (74 154)
Taxation received 3 107 - -
Cash flows from discontinued operations 32 492 349
Net cash from operating activities 248 415 315 442 1 169 422
Ca sh f low s f ro m in ve st in g
a ct ivit ies
Acquisitions of property, plant and equipment (707 626) (470 438) (1 351 820)
Acquisitions of intangible assets (255) (1 635) (8 675)
Proceeds from disposal of property, plant
and equipment - - 3 191
Acquisition of investment (322 796)
Proceeds from disposal of financial assets - 40 000 40 000
Loans repaid 860 962 1 034
Net cash in investing activities (1 029 817) (431 111) (1 316 270)
Ca sh f low s f ro m f i na nc ing
a ct ivit ies
Increase/(decrease) in interest bearing
borrowings (208 228) - 543 716
Net cash (in)/from financing activities (208 228) - 543 716
Net (decrease)/increase in cash and cash
equivalents (989 630) (115 669) 396 868
Cash and cash equivalents at the beginning
of the period 1 327 472 930 604 930 604
Cash and cash equivalents at the end of
the period 337 842 814 935 1 327 472
1. Reporting entity
Rand Water is an organisation domiciled in South Africa. The condensed consolidated interim
financial statements of Rand Water for the six months ended 31 December 2012 comprise of
Rand Water and its subsidiaries (including a special purpose entity) and the Group’s interest in a
joint venture (together referred to as the “Group”).
2. Statement of compliance
The accounting policies applied in the preparation of these condensed consolidated interim
financial statements, which are based on reasonable judgments and estimates, are in accordance
with South African Statements of Generally Accepted Accounting Practice (SA GAAP) and are
consistent with those applied in the consolidated annual financial statements for the year ended
30 June 2012.
These reviewed condensed consolidated interim financial statements as set out in this report
have been prepared in terms of IAS 34 (AC 127) – Interim Financial Reporting, the Water
Services Act, Act 108 of 1997 and the Public Finance Management Act, Act 1 of 1999 as
amended. Selected explanatory notes are included to explain events and transactions that are
significant to an understanding of the changes in the financial position and performance of the
Group since the last annual consolidated financial statements as at 30 June 2012. These
consolidated interim financial statements do not include all of the information required for full
annual financial statements and should be read in conjunction with the consolidated annual
financial statements of the Group for the year ended 30 June 2012.
The condensed consolidated interim financial statements were approved by the Board members
on 26 March 2013.
3. Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated interim financial
statements are the same as those applied by the Group in its consolidated annual financial
statements for the year ended 30 June 2012.
(a) Change in accounting frameworks
The Accounting Standards Board has withdrawn the SA GAAP framework. The Group is currently
awaiting the Accounting Standards Board’s pronouncement on the accounting framework that will
be applicable to public entities from 1 April 2013.
4. Estimates
The preparation of interim financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. Actual results may differ from these
estimates.
In preparing these condensed consolidated interim financial statements, the significant
judgements made by management in applying the Group’s accounting policies and the key
sources of estimation uncertainty were the same as those applied to the consolidated annual
financial statements for the year ended 30 June 2012.
5. Property, plant and equipment
Capital expenditure
The Group incurred capital expenditure to the value of R757 million (2011: R495 million) during
the six months ended 31 December 2012 as part of its capital investment programme, which
includes borrowing costs of over R49 million (2011: R25 million) that was capitalised during the
period.
6. Capital commitments
During the review period the Group entered into contracts totalling R646 million (2011: R495
million) as a result of the augmentation and rehabilitation of its capital infrastructure.
7. Investment
During the period the Group entered into a bond of R320 million in the Republic of South Africa
R186 stock. Fair values were estimated using the Bond Exchange of South Africa market rates.
The coupon rate is 10.5% which is paid bi-annually and the final tranche of the investment will
mature on 21 December 2026.
8. Discontinued operations
31 Dec 2012 31 Dec 2011
R’000 R’000
Revenue - 690
Expenses - (606)
Net profit before tax - 84
Tax - 17
Net profit - 101
The five year Ghana Urban Water management contract held by Aqua Vitens Rand Limited the
100% subsidiary of Vitens Rand Water Services BV concluded on 5 June 2011. The contract has
not been renewed therefore the joint venture, that is 49% owned by Rand Water Services (Pty)
Ltd, has ceased operations and is in process of winding up.
9. Interest bearing borrowings
There have been no significant movements in interest bearing borrowings during the period due
to cash flows from operations meeting funding requirements. The short term interest bearing
borrowings of R208 million consisted of the RW02 bond which was redeemed at nominal value
on 31 July 2012.
10. Retirement benefit obligation
The Group’s obligation in respect of the Post Retirement Medical Aid Benefit has increased by
R11million for the six months ended 31 December 2012. The provision is based on the actuaries
forecast for 30 June 2013 that was calculated in the 30 June 2012 actuarial valuation.
11. Growth project revenue and costs
Included in other operating income is growth project revenue of R116 million (2011: R26 million).
The corresponding project costs of R109 million (2011: R24 million) is included in other operating
expenses.
12. Contingencies
There have been no material movements in contingencies and guarantees since 30 June 2012.
13. Related parties
Rand Water is a schedule 3B entity in terms of the Public Finance Management Act and falls
within the national sphere of government. As a result the Group has a significant number of
related parties that fall within the national sphere. There have been no material changes to the
relative nature or quantum of related party transactions as described in the 30 June 2012 annual
report.
14. Operating segments
An operating segment is a distinguishable component of the Group that is engaged in business
activities from which it may earn revenues and incur expenses, whose operating results are
regularly reviewed by the entities chief operating decision maker to make decisions about
resources to be allocated to the segment and assesses its performance and for which discrete
financial information is available. The Group currently has no reportable operating segments.
15. Subsequent events
There are no subsequent events to report on.
16. Independent review by external auditors
The condensed consolidated interim financial statements for the six month period ended 31
December 2012 have been reviewed by the auditors of Rand Water, Nexia SAB&T. The review
was conducted in accordance with ISRE 2410, Review of Interim Financial Information performed
by the Independent Auditor of the Entity. Their unqualified review conclusion is available for
inspection at the registered offices of Rand Water.
17. Performance review
The performance results of the Group as compared to the same period last year are as follows:
The Group has produced stronger financial results for the six months ended 31 December 2012.
Revenue has increased by 12.2% to R3.8 billion as compared to R3.4 billion at 31 December
2011 mainly as a result of the 11.3% tariff increase implemented at 1 July 2012 and a marginal
increase in volume of 0.9%.
The raw water price increase of 7% was implemented effective 1 April 2012, thus raw water
purchases have increased by 8.5% as a result of the averaged tariff contribution of 7.6%. Net
operating costs have increased by 8.8% compared to the same period last year primarily as a
result of the net effect of the increase in energy costs by 19.7% and a decrease in chemical
costs. The 40.7% decrease in chemical costs is primarily attributable to improved turbidity levels
during the period under review as compared to the same period in the prior year.
Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 31.2%
from R552 million in 2011 to R724 million in 2012. The EBITDA margin has consequentially
increased by 2.7% to 18.9% in 2012. Profit before taxation for the period has also increased by
37.4% to R639 million with a 3.1% increase in the profit margin to 16.7%.
The current ratio has declined marginally to 1.06:1 primarily as a result of declining cash reserves
and increased trade payables as the Group continues with its capital investment programme
rollout as well as due to the investment in the R186 long term bond undertaken in December
2012. Inventory levels have also increased by over 200% since December 2011 as a result of the
first time recognition of water inventory at June 2012 and a significant increase in steel coils
purchased for the production of steel pipes. The gearing ratio increased by 2.9% from 12.9% in
December 2011 to 15.8% as a result of the tap issue on the Domestic Medium Term Note
(DMTN) programme of R544 million that was exercised before the June 2012 year end.
Cash generated from operations has decreased by 15.8% to R273 million compared to
December 2011 with cash reserves closing at almost R338 million, a 58.5% decrease from
December 2011. Capital investment expenditure undertaken during the six month period equated
to R708 million which is 50.4% higher than the same period last year.
18. Prospects
Prospects for the Group in the second half of the 2013 financial year remain positive as the
Group anticipates maintaining the returns generated in the first half of the year through continued
focus on delivering on efficiency measures and through aggressive pursuit of its growth strategy.
The Group is also well underway in terms of achieving its infrastructure development objectives in
line with its strategic objective to maintain operational integrity and anticipates achieving similar
levels as those attained in the previous year.
19. Corporate information
Board members:
Executive:
Mr DKP Sechemane (Chief Executive)
Non-executive:
Adv. MM Petlane (Chairperson)
Mr D Coovadia
Mr MJ Ellman
Ms PM Ndumo
Mr FO Otieno
Ms F Saloojee
Mr M Tsheke
Adv. M Hashatse
Mr LL Makibinyane
Ms T Magonare
Ms P Noxaka
Mrs T Nwedamutswu
Ms S Molokoane Machika
Group Company Secretary:
Ms. P Mohlabi
522 Impala Road PO Box 1127
Glenvista Johannesburg
Johannesburg, 2000 2000
Auditors:
Nexia SAB&T
119 Witch-hazel Avenue
Highveld Techno Park
Centurion
Debt Sponsor – The Standard Bank of South Africa Limited, acting through its Corporate and
Investment Banking division
Contact: Zoya Sisulu
Tel: +27 11 378 7032
Date: 02/05/2013 11:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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