City of Johannesburg Metropolitan Municipality - Group Annual Financial Statements for the year ended 30 June 2013 CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY GROUP ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Overview The City of Johannesburg is a significant role player in the economy of Gauteng and of South Africa as a whole. Whilst the City’s budgets and strategies are focused on addressing Johannesburg’s developmental challenges, it remains vulnerable to the impact of the global, regional and national economies. The City made significant progress during the year, both operationally and financially, despite a challenging operational and economic environment. A clear financial strategy, coupled with advanced planning, reliable monitoring and reporting mechanisms, as well as prompt decisive actions by the political leadership enabled the City to strengthen its financial platform for sustainable performance going forward Highlights -Surplus R3.4bn -Net Assets up 13.00% -Cash & cash equivalents up 143% Financial Performance Revenue composition has remained relatively unchanged from the previous year, with service charges and property rates accounting for approximately 70% of the total revenue generated. Government grants for the current year contributed 20% to total revenue, which is lower than the previous year’s 22% contribution. In 2012/13, the City’s high value cost drivers were bulk purchases, employee-related costs and contracted services. Bulk purchases are throughput costs for the City, and are recovered through revenue generated from water and electricity Despite the challenging economic climate, the City generated a healthy net surplus of R3.4 billion, which is a 26% decline from the previous year’s R4.6 billion. The decrease is largely due to a 30% increase in impairment charge. The achievement of a surplus is in line with its Growth and Development Strategy and augurs well towards achieving financial sustainability and resilience. Financial Position Net Assets position has improved by 13% to R30.4 billion. The increase in net assets is a result of the surplus reported in the statement of financial performance. Non-current liabilities increased by a modest 2%, while current liabilities increased by 1% when compared to the previous year. The City’s total assets increased by 7%, which is mainly due to a rise in trade receivables as well as a significant increase in cash and cash equivalents as at year end. Cash Position The cash and cash equivalents increased by 143% to R5.4 billion reflecting the results of an improved liquidity management approach adopted by the City. The surplus achieved in the current year also contributed to the significant increase in cash and cash equivalents. The Annual Report is available on the City of Joburg website www.joburg.org.za Statement of Financial Performance GROUP Figures in Rand thousand Note(s) 2013 2012 Revenue from exchange transactions Income from agency services 219 256 206 288 Interest received 561 710 433 721 Licences and permits 958 803 Other income 34 1 416 135 1 717 560 Rental facilities and equipment 220 480 195 134 Reversal of impairment 35 - - Sale of housing stock 6 973 14 693 Service charges 36 19 220 098 18 135 473 Total revenue from exchange transactions 21 645 610 20 703 672 Revenue from non-exchange transactions Taxation revenue Property rates 37 6 034 946 5 412 614 Transfer revenue Fines 320 336 435 336 Government grants 38 6 823 877 7 540 386 Public contributions, Donated and contributed property, plant and equipment 2 842 148 404 Total revenue from non-exchange transactions 13 182 001 13 536 740 Total revenue 34 827 611 34 240 412 Expenditure Employee related costs 39 -7 450 682 -6 876 153 Remuneration of councillors 40 -110 411 -98 291 Depreciation and amortisation 41 -1 997 802 -1 789 827 Impairment losses 42 -20 858 -10 013 Finance costs -1 477 487 -1 598 227 Allowance for impairment of current receivables 43 -2 850 709 -2 191 637 Repairs and maintenance -690 616 -479 033 Bulk purchases 44 -11 113 587 -10 159 070 Contracted services 45 -1 882 488 -1 978 748 Grants and subsidies paid 46 -153 955 -132 957 Cost of housing sold -9 856 -21 408 General Expenses 47 -3 715 386 -4 054 881 Total expenditure -31 473 837 -29 390 245 Operating surplus 3 353 774 4 850 167 (Loss)/gain on disposal assets -1 743 55 153 Fair value adjustments 48 159 931 91 759 Share of (deficit)./surplus of associate accounted for under the equity method 2 226 -70 160 414 146 842 Surplus before taxation 3 514 188 4 997 009 Taxationt 75 732 382 328 Surplus for the year 3 438 456 4 614 681 Attributable to: Owners of the controlling entity 3 438 456 4 614 681 Statement of financial Position as at 30 June 2013 GROUP Figures in Rand thousand Note(s) 2013 2012 ASSETS Current Assets Inventories 3 354 468 322 774 Loans to Municipal Entities 4 - - Other financial assets 5 38 851 263 170 Current tax receivable 9 187 2 343 Finance lease receivables 6 - - Trade and other receivables 7 846 366 933 770 Receivables from non-exchange transactions 8 8 421 55 206 VAT receivable 9 154 008 121 433 Consumer debtors 10 4 488 971 4 386 591 Other financial assets at fair value 11 2 578 265 3 925 853 Cash and cash equivalents 12 5 400 918 2 219 904 13 879 455 12 231 044 Non-Current Assets Zoo animals 13 16 872 17 878 Investment property 14 1 271 254 1 304 565 Property, plant and equipment 15 41 131 710 38 961 948 Intangible assets 16 492 541 682 900 Heritage assets 17 553 870 548 733 Investments in Municipal Entities 18 - - Investment in joint ventures 19 31 691 31 575 Investment in associates 20 15 847 13 737 Loans to Municipal Entities 4 - - Other financial assets 5 284 317 429 209 Deferred tax 21 24 094 20 744 Finance lease receivables 6 - - Consumer debtors 10 36 483 45 391 Other financial assets at fair value 11 2 436 147 2 069 544 46 294 826 44 126 224 Total Assets 60 174 281 56 357 268 GROUP Figures in Rand thousand Note(s) 2013 2012 Liabilities Current Liabilities Loans and borrowings 23 625 164 1 523 336 Current tax payable 3 131 4 657 Finance lease obligation 24 35 506 37 724 Trade and other payables 25 8 808 261 6 990 683 VAT payable 9 526 705 695 484 Obligations arising from conditional grants and receipts 26 1 410 169 807 011 Provisions 27 63 16 691 Deferred income 29 11 384 12 102 Financial liabilities at fair value 11&30 1 968 096 3 189 632 Consumer deposits 31 6 313 5 887 13 394 792 13 283 207 Non-Current Liabilities Project Funds payable 32 5 640 10 026 Loans and borrowings 23 11 399 462 11 277 553 Finance lease obligation 24 336 515 368 875 Retirement benefit obligation 28 1 865 790 1 789 466 Deferred tax 21 1 118 049 996 792 Provisions 27 548 890 615 255 Deferred income 29 88 462 98 380 Financial liabilities at fair value 11&30 531 061 453 443 Consumer deposits 31 465 108 457 494 Total Liabilities 16 358 977 16 067 284 Net Assets 29 753 769 29 350 491 NET ASSETS 30 420 512 27 006 777 Reserves Hedging reserve -54 928 -94 065 Accumulated surplus 30 475 440 27 100 842 Total Net Assets 30 420 512 27 006 777 Cash Flow Statement GROUP Figures in Rand thousand Note(s) 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Receipts Sale of goods and services 27 582 024 26 266 305 Grants 6 823 877 7 540 386 Interest income 405 433 309 013 34 811 334 34 115 704 Payments Employee costs -7 450 682 -6 876 153 Suppliers) -17 154 465 -23 300 075 Finance costs -1 477 487 -1 598 227 Taxes on surpluses -75 732 -382 328 -26 158 366 -32 156 783 Net cash flows from operating activities 49 8 652 968 1 958 921 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 15 -4 143 456 -3 677 328 Proceeds from sale of property, plant and equipment 15 246 057 301 072 Purchase of investment property 14 -234 -31 598 Purchase of other intangible assets 16 -80 489 -30 814 Purchases of heritage assets 17 -1 238 - Non-current assets held for sale - 3 233 Investments made - -672 852 Investments redeemed 108 430 175 558 Purchase of zoo animals 13 -766 -39 (Increase)/decrease in non-current receivables -10 331 -19 403 Net cash flows from investing activities -3 882 027 -3 952 171 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings -1 020 184 -376 074 Proceeds from borrowings 703 000 1 000 208 Repayment of provisions - -115 054 Movement in consumer deposits 8 038 11 560 Finance lease payments -34 574 -381 505 Finance lease receipts - - Project funds -4 386 -5 692 Repayment of post-retirement benefits -137 040 -139 765 Financial liabilities at fair value -1 104 781 3 524 877 Net cash flows from financing activities -1 589 927 3 518 555 Net increase/(decrease) in cash and cash equivalents 3 181 014 1 525 305 Cash and cash equivalents at the beginning of the year 2 219 904 694 599 Cash and cash equivalents at the end of the year 12 5 400 918 2 219 904 Dated: 1 July 2014 SBSA (Debt Sponsor) Zoya Sisulu (011) 721 6032 Date: 01/07/2014 09:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.