Annual Report 2019

Explanatory Notes 30 SEPTEMBER 2019 4. FINANCIAL RISK MANAGEMENT (CONT’D) 4.2 Capital management The primary objective of the Group’s and the Company’s capital management is to maximise shareholders’ value. The Company aims at distributing an adequate dividend whilst ensuring that sufficient resources are maintained to continue as a going concern and for expansion. The Group and the Company manage their capital structure andmake adjustments in the light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The ratio of net debt to equity is used to monitor capital and the ratio is kept at a reasonable level. For the purpose of capital management, net debt includes deposits from customers and other borrowed funds net of cash and bank balances. Equity consists of stated capital, retained earnings and other reserves. There were no changes in the Company’s approach to capital risk management during the year. GROUP COMPANY Sep-19 Sep-18 Sep-19 Sep-18 MUR m MUR m MUR m MUR m Debt (note 27 and 28) 9,094.8 9,376.4 1,203.3 1,396.9 Less: Bank balances & cash (note 13) (444.5) (526.1) (12.6) (107.9) 8,650.3 8,850.3 1,190.7 1,289.0 Equity 4,175.5 6,326.5 3,099.0 4,680.5 Net debt/equity ratio 2.1 1.4 0.4 0.3 One of the Group’s subsidiaries has to comply with the capital requirements set by the Bank of Mauritius, which include maintaining a minimum capital requirement of MUR 200m and minimum capital adequacy ratio of 10%. The capital requirements were met by the subsidiary. 5. NET INTEREST INCOME (a) Interest income GROUP COMPANY Sep-19 Sep-18 Sep-19 Sep-18 MUR m MUR m MUR m MUR m Interest income using EIR method Credit facilities 391.7 249.5 - - Corporate credit facilities 13.5 21.8 87.8 96.1 Credit Cards 78.6 87.2 - - Factoring 16.0 13.5 - - Placements with financial institutions 50.0 82.7 - 25.7 549.8 454.7 87.8 121.8 Other interest income Finance leases 210.1 184.2 - - Other credit agreements 682.7 550.3 - - Debt at FVTPL - - 30.8 18.3 892.8 734.5 30.8 18.3 1,442.6 1,189.2 118.6 140.1 (b) Interest expense GROUP COMPANY Sep-19 Sep-18 Sep-19 Sep-18 MUR m MUR m MUR m MUR m Bank overdrafts 1.6 1.8 - - Bank loans and other loans 386.6 354.7 32.7 83.9 Other finance costs - 24.8 6.6 24.8 388.2 381.3 39.3 108.7 Net interest income 1,054.4 807.9 79.3 31.4 CIM FINANCIAL SERVICES LTD / ANNUAL REPORT 2019 107