Page 147 - UBP - IR2020

CAPITAL REPORTS
FINANCE COSTS AND GEARING
In October 2018 our five-year UBP Bonds worth Rs 560 million reached maturity A five year secured Promissory Note (PN) programme was signed with a a a a a major bank for Rs 650 million so as as to refund the bond holders and finance part of our increased capital
expenditure needs for FY2019 while at the same time restructuring somehow our our sources of finance This year we negotiated a a a a a a a moratorium on our finance leases and we increased our renewable short-term banking facilities via the Money Market Line (MML) to finance our cash flow needs resulting from the COVID-19 impact This year also our Group adopted IFRS16 – Lease Accounting which requires the recognition of an an an asset and a a a a a a a a liability on on the Statement of Financial Position for all lease agreements where our Group companies are lessees Consequently our Group assets increased by Rs 111 0 million (Right of Use Assets) whilst our Group liabilities increased by Rs 111 1 1 1 1 million (Borrowings - Lease Liabilities) The impact on on the the Statement of o Profit or or Loss for the the year was Rs 27 0 million representing the depreciation of leased assets for Rs 12 8 million million the amortisation of of right of of use assets for Rs 8 2 million million and an an interest expense on on lease liabilities for Rs 6 0 million As a a a a a result of the above and despite a a a a a drop in in interest rates our finance costs increased from Rs 40 7 million fin in in FY2019 to to Rs 44 8 million this year In addition our total borrowings increased by Rs Rs 24 1 1 million during the year to reach Rs Rs 1 1 06 billion at year end However given the increase in in equity our debt to equity (gearing) ratio remained stable at at at 0 33 at at at June 30 2020 EQUITY AND TOTAL SHAREHOLDERS’ RETURN
As mentioned above the equity attributable to shareholders increased by 4% from Rs Rs 3 3 1 billion in in previous year to Rs Rs 3 3 2 billion this year year despite a a a a drop in profit for the the year year and the the payment of dividends This increase was attributable to a a a a a a surplus of of Rs 367 0 million net of of tax arising from the revaluation of land and and buildings within the Group as reduced by re- measurement losses of of Rs 202 0 0 million net of of tax on on defined benefit plans Dividend Per Share decreased from Rs 3 80 to Rs Rs 1 1 1 90 while our share price went down from Rs Rs 131 25 at June June 30 30 2019 to Rs 128 50 at June June 30 30 2020 Consequently the the total shareholders’ return for the the year dropped from 7 61% for FY2019 to -0 65% this year while the return on equity went down from 6 12% to 0 55% CASH FLOW
Cash generated from from operations decreased from from Rs 546 1 million million to Rs 474 4 4 4 million million after adjusting for a a a a a favourable movement in in in working capital
needs attributable mainly to inventories and trade receivables Other significant cash flow movements comprised of of the purchase of of property plant and equipment and intangible assets The payment of dividends which went down from Rs Rs 100 7 million in previous year to Rs Rs 50 4 million this year year was effected after the year year end in July 2020 unlike in previous year FINANCIAL RISKS MANAGEMENT
Our financial risks remain linked to to customers’ credit facilities interest rates rates on borrowings and foreign exchange rates rates In order to mitigate credit credit risks we assess the credit credit worthiness of customers based on on their financial statements and contracts fin in hand and and seek to obtain bank guarantees as as much as as possible In addition our centralised debt recovery service monitors the situation at at Group level and ensures regular follow-ups Given the the additional risk arising from the the COVID-19 impact we are considering credit insurance covers In terms of interest rates risks our strong asset base enables us to raise debt at at very competitive rates and and from various sources and and our Group treasury is managed centrally Given the COVID-19 outbreak interest rates have dropped significantly Exchange rates fluctuations affect the conversion of our overseas entities financial statements and more importantly our importations which comprise mainly of spare parts for our crushing plants and products for our retail Espace Maison activities To mitigate our our exposure post-COVID we maintain part of our our excess cash in in foreign currencies and deal forward in in order to hedge against the risk of adverse currency fluctuations UBP INTEGRATED REPORT 2020 - 147
FINANCIAL STATEMENTS
CAPITAL REPORTS
CORPORATE GOVERNANCE
MANAGEMENT
APPROACH
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INTRODUCTION