PRESENTATION TITLE Presented by: Name Surname Directorate Date Annual report for the 2014/15 financial year Presented by: Cyril Gamede Chief Executive Umgeni Water

Annual report for the 2014/15 financial year Part 1: Overview of financial performance Part 2: Overview of non-financial performance CONTENTS 2

PART 1: OVERVIEW OF FINANCIAL PERFORMANCE UMGENI WATER 3

4 PROGRAMME EXPENDITURE TRENDS NOTES TO THE FINANCIAL STATEMENTS OVERVIEW OF THE AUDIT REPORT AND ACTION PLAN

5 Financial Performance

6 Statements of Financial Position- Total Assets 12% improvement

7 Statements of Financial Position- Total Equity & Liabilities 5 year capex programme R8bn

Ratios Liquidity 8 The reduction in 2015 was driven through the utilisation of investments to fund the capital expenditure. Shortfall of R543m The current year operating cash shortfall to meet capex requirements was funded by financing activities of R543m (utilisation of available investments)

Ratios Return on assets The ratio on return on assets is 11.45%. 9 2% Even though operating profits grew by 14%, the increase in PPE resulting from major projects capitalised in 2015 contributed to the 2% reduction.

Ratios Debtor days in sales 10 5% Though debtors days increased by 5% compared to prior year, UW is comfortable that debt management is off the required standards to an extent that all arrears debt during the reporting period was recovered after year end.

Ratios Debt to Equity 11 5% Improvement driven by higher equity resulting from profits for the year

DETAILED EXPENDITURE TRENDS PER PROGRAMME 12

13 Spend on rural development projects contributed 47% of the total spend in 2015 (2014: 68%), while spend on upgrade projects including drought emergency interventions contributed 27% of the total spend (2014: 9%).

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NOTES TO THE FINANCIAL STATEMENTS 17 The financial statements have been prepared in accordance with International Financial Reporting Standards as approved by the National Treasury in terms of Section 79 of the PFMA.

Unauthorised expenditure - None 18

Irregular expenditure R' IRREGULAR EXPENDITURE Opening balance 1 July - - Add: irregular expenditure relating to current year Less: amounts recovered (1 560) (7 293) Less: amounts condoned by appropriate authority (795) - Closing balance 30 June - - Details of irregular expenditure – current and prior year: All incidents relate to expenditure which arose as a result of non compliance to the supply chain management policy. Disciplinary steps/criminal proceedings were not instituted as the expenditure was incurred in support of the business requirements.

Fruitless and Wasteful Expenditure /152013/14 R'000 Opening balance-- Fruitless and wasteful expenditure – relating to current year 117 Less: amounts condoned(9)(6) Less: Amounts receivable (2)(1) Closing balance--

Reduction of Fruitless & Wasteful Expenditure 21 Measures implemented Internal controls systems are continuously being reviewed and stepped up. Where it is proven to be negligence, costs are recovered from employees.

Commitment analysis 22 Decrease in gross debt by R78m due to scheduled repayment of amortising loans. At year end the debt level did not breach the borrowing limit or loan covenants. Decrease in gross debt by R78m due to scheduled repayment of amortising loans. At year end the debt level did not breach the borrowing limit or loan covenants.

Commitment analysis 23

OVERVIEW OF AUDIT REPORT 24

Analysis: matters relating the audit report per year 2010/112011/122012/132013/142014/15 Clean Audit 25 Umgeni Water has achieved a clean unqualified audit report for all the years presented

PART 2: OVERVIEW OF NON- FINANCIAL PERFORMANCE Umgeni Water 26

Analysis: achievement of strategic oriented goals 27 Achieved (100%) Partially achieved (50 – 99%) Not achieved (<50%)

Analysis of annual performance 28 Achieved (100%) Partially achieved (50 – 99%) Not achieved (<50%)

Analysis per Strategic Objective 29 Achieved (100%) Partially achieved (50 – 99%) Not achieved (<50%)

Explanatory notes (1 of 4) 30 Strategic Goal 1 : Develop strategic partnerships, increase support to customers, improve visibility and be a regional leader in the provision of bulk water and sanitation services. Customer and Stakeholder Perspective, SO1 and SO2 Outcomes: Stakeholder Understanding and Support. Customer Satisfaction. Community Sustainability. SO IndicatorReason for Variance SO 1: Per cent regional concept plan developed Development of the Universal Access Plan behind schedule due to resourcing issues. SO 1: Number of new business growth proposals implemented for new customers. Delay in implementation / acquisition of bulk services in proposed new area. Directive expected in SO 2: Number of Umgeni Water branded initiatives implemented Construction projects branding and marketing initiatives held for two of four target projects due to customer delays Note: Internal UW internal indicators / not SHC

Explanatory notes (2 of 4) 31 Strategic Goal 2 : Expand and improve funding collaborations whilst managing key cost drivers. Financial Perspective, SO3, SO4 and SO5 Outcomes: Financial Viability, Stakeholder Understanding and Support. Customer Satisfaction. Community Sustainability. SO IndicatorReason for Variance SO 3: Total RBIG funding received, Rm.RBIG is slightly below budget, but will balance in coming year SO 5: Gross profit margin % for secondary activity Gross profit for section 30 business below target SO 5: Net profit margin % for secondary activity Net profit for section 30 business below target

Explanatory notes (3 of 4) 32 Strategic Goal 3 : Remove system constraints and blockages through innovative thinking and improve efficiency of all inputs Process Perspective, SO6 Outcomes: Stakeholder Understanding and Support. Customer Satisfaction. Community Sustainability. SO IndicatorReason for Variance SO 6: Number of working days for issuing of signed contracts for capex programme tenders Above target turnaround time for issuing of signed contracts. SO 6: Per cent EPCM process reviewed and aligned to capex programme EPCM project behind schedule due to delay with awarding contract. SO 6: Per cent ERP system reviewed and implemented ERP project implementation behind schedule. SO 6: Number of repeat and unresolved findings Higher than anticipated audit findings SO 6: Number of significant unresolved litigation matters Slightly higher than anticipated unresolved ligation matters. SO 6: Number of environmental sustainability and R&D initiatives implemented Slight delay with two research / innovation and environmental projects Note: Five are UW internal indicators / not SHC

Explanatory notes (4 of 4) 33 Strategic Goal 4 : Strengthen and develop quality human resources, infrastructure capacity and water resources sustainability to support growth. Organisational Capacity Perspective, SO7, SO8, and SO9 Outcomes: Infrastructure stability, Water resources adequacy and leadership and employee development SO IndicatorReason for Variance SO 9: Per cent organisation's structure reviewed and optimised for a RWU Slight delay with organisation job profile review project / job evaluation Note: UW internal indicator / not SHC

Thank you