Adcock Ingram Integrated Report 2018

ANNUAL FINANCIAL STATEMENTS 120 ADCOCK INGRAM  Integrated Report 2018 The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact on balances subject to floating rates) in its continuing and discontinued operations: Change in rate % (Decrease)/Increase in profit before tax 2018 2017 R’000 R’000 Liabilities South African loans at variable rates +1 – (2 500) Cash balances Cash and cash equivalents +1 4 046 5 921 Bank overdraft +1 (2 489) (56) CREDIT RISK Financial assets of the Group which are subject to credit risk consist mainly of cash resources, loans receivables and trade receivables. The maximum exposure to credit risk is set out in the respective cash, loans receivable and accounts receivable notes. The Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Cash resources are placed with various approved financial institutions subject to approved limits. All these institutions are creditworthy. The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Individual credit limits are defined in accordance with an independent assessment. In addition, 89% (2017: 91%) of all debtors balances are covered by credit insurance, decreasing the risk of loss due to non-payment. Receivable balances are monitored on an on-going basis with the result that the Group’s historical exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the Corporate office. Apart from the South African Government, which comprises 14.1% (2017: 14.2%) or R207.4 million (2017: R201.9 million) of trade receivables, there are no significant concentrations of credit risk within the Group arising from the financial assets of the Group. Substantially all debtors are non-interest bearing and repayable within 30 to 90 days. Debtors are disclosed net of a provision for impairment and credit notes. LIQUIDITY RISK The Group manages its risk to a shortage of funds using planning mechanisms. This considers the maturity of both its financial liabilities and financial assets and projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The facilities in place in South Africa are R850 million for working capital purposes and a R250 million loan facility. The Group does not have any loan facility outstanding as at 30 June 2018 but the maturity profile of the Group’s long-term financial liabilities as at 30 June 2017, based on contractual discounted payments, is shown in note 21. The maturity profile of the trade and other payables is shown in note 23. The Group has provided guarantees to various regulatory authorities to the amount of R3.3 million at 30 June 2018 (2017: R2.8 million). Annexure E – Financial instruments continued