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