presentation title presented by: name surname directorate date mhlathuze water annual report for...
DESCRIPTION
OVERVIEW OF THE WATER BOARD Mhlathuze Water (MW) area of supply covers some 37,000km² stretching from uThukela River in the south and up to East Coast to Mozambique and Swaziland borders, around Vryheid and back to the uThukela River. MW operational area covers 4 WSA’s in KZN: uMkhanyakude District Municipality Zululand District Municipality uThungulu District Municipality uMhlathuze Local Municipality Supply Bulk Water and Sanitation services to Industries & Water Services Authorities in its area of operation 3TRANSCRIPT
PRESENTATION TITLEPresented by:Name SurnameDirectorateDate
MHLATHUZE WATER
Annual report for the 2014/15 financial year
Presented by: Mr. Brian NdabaChief Financial Officer
24 February 2016
GRAPHICAL AREA OF SUPPLY
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OVERVIEW OF THE WATER BOARD Mhlathuze Water (MW) area of supply covers
some 37,000km² stretching from uThukela River in the south and up to East Coast to Mozambique and Swaziland borders, around Vryheid and back to the uThukela River.
MW operational area covers 4 WSA’s in KZN: uMkhanyakude District Municipality Zululand District Municipality uThungulu District Municipality uMhlathuze Local Municipality
Supply Bulk Water and Sanitation services to Industries & Water Services Authorities in its area of operation
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ANNUAL REPORT 2014/2015Audit Report
KPMG Inc. were appointed for the 2014/2015 financial year audit.
Annual financial statements were prepared in accordance with SA GAAP, the relevant provisions of Water Services Act in a manner required by PFMA.
MW received a Unqualified (Clean) Audit Opinion for the 2014/2015 year.
All internal controls were considered as relevant.
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Corporate Performance Scorecard 2014/15
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Performance Objective
Outcomes/Impact
Indicators Measure Target2014/15
Actual 14/15
Comments/Corrective Action
1. Water Quality
Compliance
Water quality standards met
Test results, SANS 241
% compliance
Risk-defined health - ≥95% Risk-defined operational - ≥93% Accute Health - 1 Micro - ≥97% Accute Health - 1 Chem - ≥97% Chronic Health - ≥95% Aesthetic - ≥93%
100% 99.7%100%100% 100% 100%
Target exceeded.Target exceeded.Target exceeded.Target exceeded.Target exceeded.Target exceeded.
2. Non-Revenue
Water
Reduced levels of unaccounted for water (UAW)
Water lost as a % of total water produced
% <5% 1.82% Target met.
3. Reliability of supply
No unplanned interruptions to supply exceeding 24 hours
% number of days supply disrupted divided by total number of possible supply days
% <1% 0% Target met.
4. Financial Reporting Compliance
unqualified audit report
Annual external audit
Qualified/Unqualified
Unqualified Audit Opinion Unqualified (Clean Audit)
Target met
5. Staff Turnover
Optimal staff retention
% staff leaving % 8% 5.26% Target exceeded.
6. Board Member Attendance
Improved performance of fiduciary duties/governance
Annual attendance
% 80% 81.8% Target met.
Corporate Performance Scorecard 2014/15 cont..
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Performance Objective
Outcomes/Impact
Indicators Measure Target2014/15
Actual 14/15
Comments/Corrective Action
7.Effective Internal Controls And Risk Management
No repeat or unresolved findings
Internal audit reports
Number repeats No repeats findings
No repeats findings
Target met
Number unresolved
No unresolved findings
No unresolved findings
Target met
8. Bulk Supply Agreements Concluded With Municipalities/ Other Customers
Statutory and service level agreements in place
Municipalities/other customers with bulk supply agreements
% 100% 100% Target met.
9. Improve Financial Ratios
Improved viability and sustainability
Financial ratios
Liquidity 1.60 1.88 Target exceededGross profit margin % (Primary Activities)
84% 84% Target met.
Gross profit margin % (Secondary activity)
11.8% 20.60% Target exceeded
Net profit margin % (primary activity) 14% 21.6% Target exceeded
Debt/ Equity ratio 0.47 0.45 Target metReturn on assets % 8.2% 9.00% Target exceededDebtors days # 45 days 34.98 Target exceeded
Corporate Performance Scorecard 2014/15 cont..
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Performance Objective
Outcomes/Impact
Indicators Measure Target2014/15
Actual 14/15
Comments/Corrective Action
10. Increase BBBEE Spend
Spend increased and increased new entrants
% of spend increased and # of increased new entrants
% increase Maintain above 51% of discretionary spend
60% Target exceeded
# new entrants
20 new entrants 98 Target exceeded
11. Manage Costs Within The Approved Budget
No over expenditure/losses
Financial reports % variance 5% (over/under budget)
2% over budget
Within target
12. Capital Expenditure
Infrastructure available to meet demands
Overall project expenditure within R target
% variance 75% spent
84.79% Target met.
Overall project completion dates within targets
% variance 80% 90% Target exceeded.
13. Increased access to Services
Contribution to national objectives
No. of new projects
No. of new projectsDOE & DBE
DWS
DEA
144 (based on the number of schools)
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76 DOE
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Target not met.39 DOE projects were cancelled due to the fact that the budget was retracted by DOE. Target met.
Target met.
Corporate Performance Scorecard 2014/15 cont..
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Performance Objective
Outcomes/Impact
Indicators Measure Target2014/15
Actual 14/15
Comments/Corrective Action
14. Engagement in Secondary Activities
Extent of involvement
% of total turnover
% of total turnover
63% 61% Target not met due to the external work that was suspended by DOE.
15. Achieve Statutory Reporting Compliance
Reporting compliance achieved
Statutory submissions made on time
Submission dates met/missed
Submission dates met
3rd Quarterly Report submitted on 14 May 2015 (deadline 15 May 2015).Business Plan and Shareholder Compact submitted on 28 May 2015 (deadline 31 May 2015).
Target met.
16. Jobs Created Permanent and contract (direct)
Total Number of jobs created
Number
5
118 Target exceeded.(Due to the transfer of CoU Staff)
Temporary (indirect)
Total Number Number 500 768 Target exceeded.
17. Corporate Social Responsibility Initiatives
Good corporate citizenship
Number of initiatives
Number and and value
At least 9 initiatives for
R1.2 m 14 initiatives to the value of R1 145 564
Target exceeded.
18. Training And Skills Development
Skills and capacity building
Training courses, learner-ships, bursaries
Total Number of training, learner ship and bursaries
108 118 Target exceeded.
Bulk water volumesBulk water volumes increased by 50% mainly due to the increase in raw water volumes (RBM and City of uMhlathuze (Esikhaleni)) and the increase in potable water supply to the City of uMhlathuze for Richards Bay.
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Bulk water volumes by customer
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Tariff increase Raw water and Purified waterThe graphs on tariffs for the 2 major Water schemes
shows a downward trend for the past five years.
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Tariff increase Buoyant and Dense waste waterThe graphs on tariffs for the two Waste water
schemes shows a downward trend for the past five years.
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Revenue per Business segmentAlthough the tariffs for all the schemes shows a downward trend for the past five years, revenue increased overall by 44% generated from better than expected bulk water volume sales. This is as a result of the drought situation in KwaZulu-Natal, whereby Mhlathuze Water was in a position to supply the City of uMhlathuze with water from the Mhlathuze River and Nsezi Water Treatment Plant.
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ENERGY COSTEnergy costs increased by 90% from prior year due to more energy usage for additional volume sold. The increase from Eskom that was imposed by NERSA, as well as the increase from the City of uMhlathuze were also implemented. The Thukela Goedertrouw Scheme is running at full capacity to transfer water to the Goedertrouw Dam due to the droughtsituation in the KwaZulu-Natal area.
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Maintenance materialsMaintenance costs increased by 189% from the previous year. Maintenance work was done at all Mhlathuze Water installations as well as all the City of uMhlathuze plants. Work on the C-Line effluent line overlapped from previous year to this financial year and also include the current year scope.• Mhlathuze Water maintenance expenditure - R31,2 million – 73% (2014:R14,7 million 99%) • City maintenance expenditure - R11,7 million – 27% (2014: R0,1 million –1%)
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Chemicals/PurificationChemical costs increased by 65% mainly due to the increase in water demand resulting in more chemicals being used.
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Depreciation/amortisationDepreciation increased by 15% against the previous year. Projects that were commissioned during the current financial year were:-• Rerouting of the B-Line (for effluent disposal);• Upgrading of the Intake Pump Station and band screens;• Refurbishment of Head Office buildings; and• Telemetry system, etc.
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Staff costStaff costs increased by 35% from the previous year mainly due to the approved increase of 8% and the staff complement that increased from 182 to 195. The 111 employees from the City of uMhlathuze are also included in the costs, but these (costs) are fully recovered from the City.
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Other operating expensesOther operating expenses increased by 52% against the previous year. R4,5 million included in this category is for diesel required to pump additional water to the City of uMhlathuze. These cost were recovered.
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Net Finance costNet finance costs decreased by 86% due to increased investments and interest income thereon.
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Financial Performance 2014/2015Mhlathuze Water has maintained strong operating surpluses. Overall, the surplus for the year of R89,9 million (2014: R79,1m) reflects an increase of 14% from the previous year.
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2011 2012 2013 2014 2015
67,061
51,930
68,070
79,198
89,998
Surplus R'000
Cash flows from operating activitiesNet cash generated from operating activities increased by 18% compared to the prior year. Mhlathuze Water continues to maintain strong operating cash flows which has allowed for the repayment of debt and funding of capital expenditure. The graph below illustrates the net cash flows from operating activities for the past five years.
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Cash flows utilised in investing activitiesNet cash utilised in investing activities increased by 3% from
the previous year due to the acquisition of assets. The three major projects that contributed to the increase are:• Nsezi Balancing Reservoir (20ML) - R17 million• City of uMhlathuze pump station upgrade - R56 million• Re-routing of the B-line - R12 million
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Cash flow from financing activitiesNet cash utilised in financing activities increased by 3% mainly due to loan repayments.
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Cash balancesSufficient short term investments are held to fund Capital commitments.
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Borrowing limitsThe borrowing limits for the period 2013 to 2015 have been approved by National Treasury in concurrence with the Minister of Water and Sanitation. R70,7million was unutilised at end 2015.Mhlathuze Water has forwarded a new proposal to the Minister of Water and Sanitation to submit to National Treasury for the new periods 2016, 2017 and 2018.
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External Projects Apart from its primary activities Mhlathuze Water implements external projects (Section 30 activities) for different government institutions to the value of R473 million (2014: R458 million), an overall increase of 3%.The Department of Water and Sanitation increased by 31% whereas the Department of Education decreased by 43% due to work that was suspended.These project costs are fully recovered from these departments.The graphs below gives an overview of Mhlathuze Water’s involvement in these projects.
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Supply Chain ManagementTotal spend on goods and services for the 2014/2015 financial year was R682 million, of which R408 million (60%)was spent on companies that are more than 51% black-owned, and 20% (equivalent to R135 million) was spent on empowered companies.
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Employment Equity profile 30 June 2015This year, our recruitment and retention strategies have continued to focus on employment equity. The number of female employees has shown an increase on the previous year’s 43% to 46% in 2014/2015. There are 2.81% of employees who have a disability; compared to 0.01% in the previous year. The complexion of our race profile has improved significantly with the increase of coloured employees to 2% as shown in the pie-chart below.
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MID-YEAR PERFORMANCE 2015/2016
Surplus of R49,4 million comparing to budgeted surplus of R31 million, positive variance of R18,4 million.
Complied with water quality standards. 100% reliability of supply, no unplanned
interruptions. Current ratio (liquidity) 1.99 against 1.60
target. Return on assets 10% against 7% target. B-BBEE of 78% against 51% target. Outstanding debtors days 36 days against
budget of 45 days. 30
MID-YEAR PERFORMANCE 2015/2016 HR TARGETS
Staff turnover - 1.15%, target of 8%, positive variance of 6.85%.
Persons with disabilities – 1.7% (4), target of 2%, below target.
Employment Equity • Females 48% - Males 52% (Staff
complement)• Management level: Females 48% - Males
52%Disabling Injury Frequency Rate (DIFR)
0.32, target 1.75.31
Presentation to PCWS
MID-YEAR PERFORMANCE 2015/2016 Capital ExpenditureCapital expenditure at 43% of budget.
(Total Budget R157million) Three projects in progress
Nsezi balancing reservoir (20ML) – R21 million actual, committed R17 million – Total budget R38 million
2nd Balancing 20ML reservoir – R16 million actual, committed R 19 million – Total budget R35 million
Nsezi WTP Empangeni Pump station R3 million actual, R1 million committed – Total budget R17 million.
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THANK YOU
33Presentation to PCWS