LENMED AIR 2019.pdf

30. Financial Risk Management continued 30.3 Liquidity risk continued Long term liabilities and shareholders’ loans The directors consider the carrying amounts of the long term liabilities to approximate their fair values. Capital management The Group’s objectives when managing capital are to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefit for other stakeholders. The Group manages the capital structure in light of changes in business activities and economic conditions. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. The Group monitors risk to capital on the basis of the interest bearing debt to capital ratio. This ratio is calculated as net interest bearing debt divided by capital. Net interest bearing debt is calculated as total interest bearing debt less cash and cash equivalents. Capital comprises all components of equity (i.e. ordinary shares, minority interest, retained earnings and other reserves). 30.4 Foreign currency risk The Group is exposed to foreign currency risk through its offshore subsidiaries, Maputo Private Hospital SA (Maputo hospital) and Lenmed Health Bokamoso Private Hospital (Pty) Ltd (Bokamoso hospital). A US dollar denominated long term loan exists at Maputo hospital. However, revenue at the hospital is partially US dollar denominated, thus forming a natural hedge. The net working capital at Maputo hospital is denominated in Mozambican Meticais. This amount is considered immaterial and no hedging takes place. To date the Group has not suffered any material currency loss. There are no long term loans at Bokamoso hospital except for shareholders’ loans. These are denominated in Pula. Revenue at the hospital is denominated in Pula, also forming a natural hedge. Revenue and profits generated by this hospital are expected to be sufficient to settle the shareholders’ loans over a maximum period of seven years. The Group does not formally hedge its foreign currency risk. Group Figures in R’000 2019 Restated 2018 Foreign Currency Translation Reserve 141 067 67 727 Sensitivity analysis Increase of 10% in functional currency rate would result in a reduction in reserve of: (14 107) (6 773) Decrease of 10% in functional currency rate would result in an increase in reserve of: 14 107 6 773 Notes to the consolidated annual financial statements continued CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 118