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NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
For the year ended 31 May 2016
113
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
3.
Financial instruments and financial risks
continued
Financial risks
In the course of its business, the Group is exposed to a number of financial risks: credit risk, liquidity risk and market
risk (including foreign currency, interest rate and other price risks). This note presents the Group’s objectives, policies
and processes for managing its financial risk and capital.
Risk management is monitored and managed by key personnel of each entity in the Group on a daily basis based on
their specific operational requirements.
Classes of financial instruments
2016
R’000
2015
R’000
2016
Financial assets
Cash and cash equivalents
589 027
788 411
Trade and other receivables*
2 520 624
2 724 253
Contingent consideration receivable
15 860
17 757
Loans receivable
104 127
74 302
Loans to associates and joint ventures
282 196
201 086
3 511 834
3 805 809
Financial liabilities
Non-interest-bearing borrowings
16 087
16 087
Trade and other payables*
2 547 378
2 890 319
Contingent consideration
83 563
123 902
2 647 028
3 030 308
Net financial position
864 806
775 501
*Trade and other receivables and trade and other payables exclude non-financial instruments.
Credit risk
Credit risk arises because a counterparty may fail to meet its obligations to the Group.
The Group is exposed to credit risk on financial assets mainly in respect of trade receivables, loan receivables and cash
and cash equivalents.
Trade receivables
Trade receivables consist primarily of invoiced amounts from normal trading activities. The Group has a diversified
customer base and policies are in place to ensure sales are made to customers with an appropriate credit history and
payment history. Individual credit limits are set for each customer and the utilisation of these credit limits is monitored
regularly. Customers cannot exceed their set credit limit, without specific Senior Management approval. Such approval
is assessed and granted on a case-by-case basis. Management regularly reviews the debtors age analysis and follows up
on long-outstanding debtors. Where necessary, a provision for impairment is made. A portion of the Group’s customer
base is made up of major retailers and wholesalers with the balance of the customer base being widely dispersed.