Rand Water | Integrated Annual Report 2025

Consolidated Annual Financial Statements for the year ended 30 June 2025

BOARD REPORT (CONTINUED)

Debt management interventions and strategies employed which included the signing of Debt Settlement Agreements with several municipalities yielded positive benefits. The revenue recognition criteria were met for certain municipalities enabling the recognition of previously unrecognised revenue in terms of IFRS 15, amounting to a net R114.5 million. Rand Water continues on an upward net income trajectory, with an increase of 1.81% to R4.65 billion (2024: R4.56 billion) in net income. This sustained growth underscores the entity’s strong revenue performance, effective cost management and resilience in the face of operational constraints. The investment strategies and management of our financial assets have resulted in excellent returns in net finance income, contributing significantly to the bottom line. Total capital expenditure including borrowing costs increased by 16.51% to R2.5 billion (2024: R2.1 billion). This stems primarily from accelerated project execution in pipelines, civil and mechanical infrastructure within the current year, which performed very well and are on route to recover lost time relating to bottlenecks experienced in previous periods. Net finance income increased by 17.56% to R1.5 billion (2024: R1.3 billion). This was supported by the strategic investments that have yielded higher returns.

9. Business performance

2022 Restated Actual

2021 Restated Actual

2025 Actual

2024 Actual

2023 Actual

Net income margin Gross income margin Income per employee Average cost of capital Debt-equity ratio Return on assets Assets to sales ratio

% %

20.26 31.70

20.91 31.88

18.10 30.80

19.60 30.50

19.90 34.40

R'000

1,300.26

1,294.20

1,012.24

991.19

943.26

%

10.21

10.18

9.47 0.12 6.20 1.63 2.37

9.47 0.14 7.40 1.71 2.78

9.47 0.15 8.30 1.66 2.52

Times

0.07 9.00 1.65 2.40

0.08 9.90 1.56 3.34

%

Times Times

Current ratio

The Group continues to maintain high performance results in the current reporting period. The Group reports a high gross income of 31.70% (2024: 31.88%) which is a 0.18% decline from prior year at the back of growing operating costs. Whilst revenue increased with a 4.9% tariff increase, input costs increases were higher; particularly in energy, attributable to Eskom and municipality tariff increases. Furthermore, DWS implemented a significant increase in the water purchases tariff, impacting costs in the latter part of the financial year. Expected credit losses also contributes negatively to the bottom line, resulting in a 20.26% net income margin, a marginal 0.65% decline from prior year (2024: 20.91%). Amidst these growing operating costs, the group executed a comprehensive maintenance programme that strengthens long-term operational sustainability, underpins the continued reliability of supply and further enhance value creation for stakeholders. Despite the slight decline in margins, operational efficiencies, prioritisation and stringent expenditure management has resulted in an out performance of both margins against the current year targets. The margins were further supported by higher net finance income from strategic investments. The net income per employee increased to R1.30 million (2024: R1.29 million). The slight 0.47% increase succinctly demonstrates a healthy balance between headcount growth and productivity in line with net income. The return on average assets remained resilient at 9.0% (2024: 9.9%) resulting from a 15% increase in assets, mostly financial assets.

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Rand Water | Integrated Annual Report 2025