RAND WATER ANNUAL REPORT 2023

Financial Performance Overview

Gross Profit: Despite the rising inflation and depreciation of the Rand, putting pressure on our input costs, Gross profit increased by 12.1% to R6.034 million (FY2022: R 5.380 million) on a year-to-year basis attributable to more robust revenue performance primarily driven by the higher potable water sales volumes. Net Income: Our annual net income increased to R3.536 million (FY2022: R3.462 million). Our performance is unwavering in the face of a difficult operating environment outside of our control, as evidenced by rising inflation rates, poorer currency exchange rates, increased load shedding, and higher borrowing rates. While we benefited from rising interest rates due to the increased investment in term deposit and bond Investments, the deterioration in the credit quality of some customers impacted our bottom line.

The year was marked by a turbulent global economic climate and increasing power shortages, which had an impact on the organisation, just like other public and private entities. As we navigate the path to financial recovery after the COVID-19 pandemic, our financial position remains strong despite the additional challenges posed by a weakening Rand exchange rate, increasing interest rates, load shedding, and political and socio-economic instability. Revenue: Financial Year 2022/23, continued to show solid financial performance with revenue growth of 10.9% to R19.6 billion (FY2022: R17.7 billion), supported by the tariff increment of 8.8% and a 1.6% year-on-year growth in sales volumes. Revenue not recognised as emanating from the application of International Financial Reporting Standards (IFRS)15 amounted to R125 million (FY2022: R117 million).

(R'mil)

Gross Income Net Income

6 034

5 693

5 656

5 539

5 380

Revenue

(R'mil)

3 831

3 549

3 536

3 462

3 295

2023 2022 2021 2020 2019

19.578

17.661

16.556

2019

2020

2021

2022

2023

16.424

15.539

Return On Assets: Local municipalities continue to face financial difficulties, as our major customers credit quality has worsened and exerts pressure on our profitability. This is evidenced in the reduction of return on average assets to 6.2% (FY 2022: 7.4%) The situation was intensified by the 9% increase in total average assets.

Tariff: Following a 5.8% tariff increase for FY2022, we received a tariff increment of 8.8% for FY2023, which assisted in funding operations and capital renewal projects, while expansion projects are typically funded through a combination of internal cash generated and borrowings. A tariff of 9.2% is approved for the FY2024. The tariff trajectory is moving in the right direction to support our strategy to secure cost-reflective tariffs.

ROE

ROAA Average Cost of Capital

9.93%

9.93%

9.47%

15.7%

9.47%

15.2%

9.47%

Tariff Increment

9.0%

10.2%

7.4%

11.7%

10.8%

8.8% 2023

8.3%

5.8% 2022

7.4%

6.2%

2019

2020

2021

2022

2023

Total Assets: increased by 9% driven by an increase in non current assets (6%). This is a testament to our dedicated efforts to bring assets in to use, thus reducing the assets under construction. Efforts to address our maintenance programme and deploy the assets under construction into the system, necessitated erratic planned shutdowns.

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