SHAREHOLDER RETURNS
Dividend policy
In line with our strategic objective to create shareholder value,
Senwes reviewed the dividend policy which was previously based
on a payout ratio. In view of the volatility of agricultural conditions
and the impact thereof on reported earnings, we decided to change
to a dividend policy of absolute growth in dividends.
Share purchases as Treasury
stock
During the year, the Group spent R102,2 million on the acquisition
of Senwes shares on the open market. This brings the total
repurchased shares since the beginning of the repurchase
programme in 2012/2013 to 11,5 million shares. Senwes Capital
(Pty) Ltd repurchased 6.4% of its shares as Treasury stock and the
intention is to convert its current cash-settled long-term phantom
incentive scheme to a full share scheme.
OPERATIONAL
PERFORMANCE
Senwes Credit
The drought resulted in slower repayment of the credit book and
resulted in higher margins for the credit business (3.5%: 2014
against 3.2%: 2013). The debt is supported by strong balance
sheets and a large increase in provisions was not necessary. By
30 April 2014 arrears normalised to 3.4% (2013: 3.3%) of the total
book.
The credit book grew by 14.95% year-on-year and contributed to
a 35.4% increase in net profit to R88 million. The profit share of
WesBank of R7,6 milion for 2014 represents a 43.99% increase
against 2013.
Despite the drought and pressure from producers to decrease their
insurance premiums, Certisure managed to maintain its margins.
The geographic expansion of the insurance business in conjunction
with NWK increased the sustainability and growth potential of the
Group.
The R95 million net profit of Senwes Credit and Certisure represents
36.5% of the total profit from operating activities.
Senwes Grainlink
Senwes Grainlink’s results were impacted heavily by the drought,
which resulted in a decrease of 26% in respect of volumes. Market
share in the grain silo business was increased, despite increased
competition in a decreasing market.
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Stock losses in Mozambique and a devaluation impairment due to
the weakening of the Zambian exchange rate is the main contibutors
to an impairment of R22 million raised by the Group for the African
business. The African business will be restructured during the
2014/2015 financial year and new strategies to penetrate the African
market will be considered with our partner Bunge.
New entrants to the grain trading market, together with lower
volumes, placed the business of Tradevantage and Bunge Senwes
under pressure. The increase in commodity prices required an
increase in operating capital, which in turn had a negative impact
on margins. Volumes traded by Bunge Senwes during the 2014
financial year increased by 79% which represents a market share
of 23% of maize exports. Despite lower volumes, the net profit of
Grainovation increased by 42%.
The R85 million net profit of Senwes Grainlink represents 32.7% of
the total profit from operating activities.
Senwes Village
The reporting period was characterised by a difficult business
environment for Senwes Village. The input pillar was impacted
negatively by drought conditions during the first half of the 2013/2014
planting season. During the current year the input pillar focused on
the integration of the Senwes and AFGRI business as well as the
roll-out of the business model in the new business Hinterland.
Senwes Mechanisation’s business activities were influenced negatively
by the drought and producers postponed their capital replacement
programmes accordingly.
Mechanisation, however, managed to increase its market share
during 2013/2014 by 2.1% to 32.3%. The business unit has invested
in the renewal of both the Wesselsbron and Hoopstad workshops.
JDI, the mechanisation venture between Senwes and the Tomlinson
family in the Eastern and Western Cape, delivered good results for
the third year running and the business integration and expansion
into new areas yielded good results.
The results of Grasland also reflected a decline. Lime sales followed
the same trend as the capital replacement programme and producers
postponed liming to a more normalised season.
Village delivered a net profit of R80 million during 2013/2014, which
represents 30.8% of the total profit from operating activities.