FINANCIAL REVIEW
SIMPLIFIED STATEMENT OF FINANCIAL POSITION
ASSETS
2020 R ’ m
2019 R ’ m
Property , plant and equipment 1 290 715 Intangible assets and goodwill 41 9 Investment in JV ’ s and associate 216 255 Operating capital Inventory 882 609 Derivative financial instruments 86 52 Debtors and receivable loans 5 471 4 085 Long-term 1 736 1 204 Short-term 3 735 2 881 Agency inventory 105 234 Cash 174 31 Other 76 70 TOTAL ASSETS 8 341 6 060
EQUITY AND LIABILITIES Own equity 2 560 2 336 Non-controlling interest 343 27 Long-term debt 670 1 002 Short-term debt 3 814 2 013 Creditors 800 575 Other 154 107 TOTAL LIABILITIES 8 341 6 060 NAV
7,2 % R15,06 / s R14,05 / s Own capital ratio ( 4,0 %) 35 % 39 % ROE - 13,0 % 13,0 %
CAPITAL ALLOCATION Capital is mainly allocated to fixed capital projects , credit extended to producers , machinery and retail stock , as well as working capital for the expansion into new markets . Material movements can be explained as follows :
➊ Property , plant and equipment increased ( including investment property ) by R575 million during the year . The addition of the KLK , Grainovation and Falcon companies into the Senwes Group , contributed R376 million of this increase . The silo services business , Grainlink , incurred capital expenditure of R90m on the aeration project which aims to add value to the client by accep ting grain at a higher moisture level than the industry norm .
➋ Increase of R273 million , which mostly relates to the inclusion of KLK ’ s inventory .
➌ Increase in debtor ’ s book of 33,9 %, mainly due to higher summer production credit and higher term loans . Senwes also extended a loan to Suidwes to the value of R508m which is classified as a long-term loan .
HOW WE FUND Own equity increased by R224 million , while long and short-term loans increased by R1,5 billion . This can be explained as follows :
➊ There was a R350 million transfer from long-term to short-term debt . Total short-term debt increased by R1,8 billion mainly due to the increase in the debtor ’ s book and the loan to Suidwes Landbou . The unutilised short-term facility of R1,1 billion ensures adequate liquidity for growth opportunities and unexpected transactions .
➋ The increase in inventory is funded by the increase in trade creditors .
➌ The increase in PPE is mainly funded by the growth in equity .
RISK ASSESSMENT AND SENSITIVITY ANALYSIS
RESIDUAL RISK PERFORMANCE AGAINST TARGETS The residual risk continued to move between the acceptable risk tolerance levels of the company . These risks among others was the everdeclining soft commodity closing stocks , scarcity of higher-grade maize , inverse cross-season spreads and ultimately the impact of Covid-19 . The risk tolerance levels would have been breached in the last quarter if it had not been for an expected good maize crop along with the swift and decisive risk response plans implemented before and during the last quarter in order to manage the group ’ s risk levels within the tolerance levels .
Senwes remains fully committed to the industry and will continue to appropriately position itself during difficult times to ensure long-term sustainability . We also continuously strive to derisk the risk profile of Senwes through our strategic initiatives , which include :
� Diversification within the core business ;
� Increased investments in efficiencies in the value chain ;
� Active management of slow moving mechanisation stock ;
� Management of interest and other carry cost ;
� Continuous monitoring of bank covenants ;
� Increased focus on credit practices as well as client selection within this unit .
SENWES INTEGRATED REPORT 2020
77