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5/10/10

Botshelo Water 2008/2009 Annual Report Presentation to Portfolio Committee on Water and Environmental Affairs

5/10/10

CONTENTS1. Relationship with Municipalities –

achievements and challenges

2. Financial performance

3. Non- financial performance

4. Overall operating conditions

5. Debt / capital structure

6. Findings and analysis of Auditor – General’s report

5/10/10

Relationship with MunicipalitiesBW has Water Services Provider Agreements

with Dr Ruth Segomotsi Mompati and Ngaka Modiri Molema District Municipalities (DrRSMDM & NMMDM) in the North West Province.

DrRSMDM & NMMDM are Water Service Authorities and BW provides water services to 7 of their local municipalities.

5/10/10

Relationship with Municipalities - achievementsAcceptance of BW Turnaround Strategy/Plan

by WSAs & Provincial Government.

WSAs, LMs and Dikgosi are involved in BW Strategic Planning sessions.

Municipalities accepted new water tariffs.

Water supply to rural areas was achieved during the year under review with minimal outages.

Accurate and timely meter reading, together with Municipalities, improved acceptance of billing procedures.

5/10/10

Relationship with Municipalities – achievements (continued……)Engagement of National Treasury (MFMA,

Sec.42) to mediate i.r.o. of Ditsobotla Local Municipality.

Resuscitation of Coordination Committee in particular Dr RSMDM.

5/10/10

Relationship with Municipalities - challengesRe-convening of the Coordination Committee

in NMMDM.

Delayed payments by WSAs & LMs for water services rendered.

Non-payment of long outstanding and growing debts.

Term of Water Services Provider Agreements.

Failure by Municipalities to promulgate bye - laws (unauthorised connections).

Industrial action by Municipalities employees.

5/10/10

Financial analysis - audit reportDisclaimer due to:

• Opening Balances – insufficient audit confirmation by the AG to comply with IFRS, GAAP & Auditing Standards

• Property Plant and Equipment – Rights and obligations

• Correction of Errors R37 million corrections made

• Inventory - Valuation

• Provision for leave Pay – system ineffective

• Revenue – limitation of scope (system)

• Cost of Sales – limitation of scope (system)

• BW has reported the previous auditors to IRBA

5/10/10

Overview of Income StatementTurnover increase from R75.4 Million to

R88.4 Million (17%)

Gross Profit increased from R52.8 Million to R61.9 Million (17%)

Employee cost reduced by R2.0 Million (5%)

Other expenses reduced by R7.0 Million (excluding extraordinary expenses) (38%)

5/10/10

Overview of the Balance SheetBW is solvent (reserves R7.5 Million)

Cash balance R26.0 Million

DWA debt were reduced by R16.0 Million due to overbilling

Assets were R17.0 Million undervalued in previous years

5/10/10

Financial position and key ratiosBW is solvent (reserves R7.5 Million)

Debtors collection period (114 days)

Current Asset Ratio 0.69

Fire Proof Ratio (excluding stock and DWA debt and provisions) 3.11

Creditors payment period 255 days

Creditor payment period excluding DWA 142days

5/10/10

Analysis of water Sales and RevenueDescription 2009 % 2008 %

Bulk Water Sales 24.02 27 23.28

31

Retail Water Sales

15.42 17 5.92

8

Rural Recoveries 36.11 41 8.27

11

Government Grants

- 22.50

30

Projects 12.01 14 7.79

10

Services 0.81 1 7.67

10

Total 88.37 100 75.43

100

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Analysis of Expenditure

Description 2009 % of Turnover

2008

Cost of Sales 26.45 30 22.62 30

Employee Costs

34.05 38 36.03 48

Other Expenses excluding adjustments

18.59 21 29.03 38

Turnover 88.37 75.44

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Analysis of ProfitabilityDescription 2009 % 2008 %

Sales 88.37 100 75.44 100

Gross Profit 61.91 70 51.81 69

Net Profit/(loss)

7.94 9 (31.79) (42)

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Non-financial performanceRecruitment of qualified technical staff.

Successful implementation of Turn Around Strategy and Plan

Launch & implementation of Employee Wellness Programme – to manage change management

Water services were provided despite all challenges

5/10/10

Overall operating conditionsNon- ownership of the water infrastructure

by BW (matter raised with the Ministry).

Insufficient funding to adequately maintain the water infrastructure.

Lack of water infrastructure in areas to accommodate population growth.

5/10/10

DEBT / CAPITAL STRUCTURENo long term Loans

Requests from DWA

Assets transfer

Writing off of the old debt (R48 million)

5/10/10

Findings and Analysis of AG’s Report2008 Opening Balances:

2009 figures were audited by the AG.

BW will address the 2009 qualifications in order to make the financial figures acceptable.

Property , Plant and Equipment

Verification in progress

Necessary adjustments will be made

Fixed property rights may be problematic as ownership transfer procedures take time

5/10/10

Findings and Analysis of AG’s Report ContinuedCorrection of Errors

Only a contribution in drawing the disclaimer opinion

Inventory

Stock sheets compiled will be valued by external valuer.

Provision for Leave Pay

System changed from manual to electronic ( VIP Payroll to be used for capturing leave)

Revenue & Cost of Sales

New accounting system introduced.

5/10/10

Thank You

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