LENMED AIR 2019.pdf

30. Financial Risk Management The Group’s financial liabilities comprise long-term liabilities, short-term liabilities, trade and other payables, taxation payables and bank overdrafts. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such as loan accounts, trade receivables and cash and cash equivalents, which arise directly from its operations. The main risks arising from the Group’s financial instruments are interest rate risk, credit risk, liquidity risk and foreign currency risk. These risks are managed as follows: 30.1 Interest rate risk Interest rate risk is the risk that changes in the interest rate will affect the Group’s income or value of its financial instruments, namely its cash and cash equivalents and interest-bearing borrowings. The Group is exposed to interest rate risk through its commitments in interest bearing borrowings, cash and cash equivalents and instalment sale agreements. The Group is willing to accept the risk of market-related interest rates. Interest risk table The following table demonstrates the sensitivity of profit before tax (through the impact on floating rate borrowings) to a possible change in interest rates, with all other variables held constant. Group Figures in R’000 2019 Restated 2018 Interest bearing loans payable 1 130 278 1 139 379 Instalment sale liabilities 66 369 61 075 Bank overdraft 120 397 94 990 1 317 044 1 295 444 Sensitivity analysis Increase of 100 basis points would result in a reduction in profit before tax of (13 170) (12 954) Decrease of 100 basis points would result in an improvement in profit before tax of 13 170 12 954 30.2 Credit risk The Group applies the IFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade and other receivables. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of revenue over a period of 12 months before 28 February 2019 or 1 March 2018 respectively and the corresponding historical credit losses experienced within this period. The historical cost rates are adjusted to reflect current and forward- looking information on macroeconomic factors affecting the ability of the patients to settle the receivables. The maximum exposure is the carrying amount as disclosed in note 15. 30.3 Liquidity risk The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate un-utilised borrowing facilities are available. In addition, the Group maintains a strong business relationship with its bankers. The table summarises the maturity profile of the financial liabilities as at 28 February 2019, based on contractual undiscounted payments. Group Figures in R’000 Within 1 year 1 to 5 years Maturity analysis — 2019 Borrowings 150 349 1 060 147 Trade and other payables 337 219 - 487 568 1 060 147 Maturity analysis - 2018 Borrowings 112 511 1 118 762 Trade and other payables 308 184 - 420 695 1 118 762 LENMED ANNUAL INTEGRATED REPORT 2019 117