10. FINANCIAL RISK MANAGEMENT AND NET DEBT
10.1 Financial risk management
 

The Group has exposure to the following risks from its use of financial instruments: credit risk; liquidity risk; foreign currency risk; interest rate risk and equity price risk.

This note presents information about the group’s exposure to each of the aforementioned risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. IFRS 7 requires certain disclosures by class of instrument which the group has determined as its segments.

The group’s major financial risks are mitigated in the way that it operates, firstly through diversification of geography and secondly through decentralisation of the business model. Bidcorp is an international group with operations in the United Kingdom, Europe, Asia, Australia, New Zealand, South America, Middle East and various southern African countries.

Bidcorp’s philosophy has always been to empower management through a decentralised structure thereby making operational management responsible and accountable for the performance of their operations, including managing the financial risks of the operation. The operational management reports to the CEO who in turn reports to the Bidcorp board of directors. Operational management’s remuneration is based on their operation’s performance resulting in a decentralised and entrepreneurial environment.

Due to the diverse structure and decentralised management of the group, the group audit and risk committee (GARC) has implemented guidelines of acceptable practices and basic procedures to be followed by divisional and operational management. The information provided below for each financial risk has been collated for disclosure based on the manner in which the business is managed and what is believed to be useful information for stakeholders.

The overall process of risk management in the Bidcorp group, which includes the related system of control, is the responsibility of the Bidcorp board of directors. The Bidcorp GARC is governed by a charter and reports regularly to the board of directors on its activities.

The GARC’s primary risk responsibilities include:

  • review of the group’s risk policies and approach to risk management;
  • to consider all material risks to which the group is exposed, ensuring that the requisite risk management culture, policies and systems are progressively implemented and functioning effectively;
  • management is accountable to the board for implementing and monitoring the processes of risk management and integrating this into day-to-day activities; they confirm these processes through the completion of the quarterly Bidcorp management representation letter submitted to the Bidcorp GARC;
  • performance of ongoing monitoring of the enterprise-wide risk assessment process to ensure risks and opportunities are adequately identified, evaluated and managed at the appropriate level in each business, and that the individual and joint impact of risks identified on the group is considered,
  • to review legal matters that could have a material impact on the group, as well as considering the adequacy and effectiveness of the group’s procedures to ensure compliance with legal and regulatory responsibilities; and
  • consideration of reports provided by management, internal assurance providers and the independent auditors regarding compliance with legal and regulatory requirements.

Due to the breadth of the geographical spread of the Bidcorp operations, Bidcorp has adopted a globally relevant risk management strategy. This strategy has been communicated, and implementation thereof delegated, to the respective local management teams. Bidcorp believes using a common group framework for the management of risk creates a shared foundation from which a view of the global risk universe is developed, but embraces the locally relevant risks faced by each business. The Bidcorp group risk management policies are established to identify and analyse the risks faced by the group, to set appropriate guidance and parameters within which risks are to be reported to the Bidcorp GARC. Bidcorp continues to grow and develop a robust and constructive control environment in which all employees understand their roles and responsibilities.

Each business reports to one of five divisional audit and risk committees (DARC), which subscribes to the same philosophies and practices as the Bidcorp GARC. The DARCs report quarterly to the Bidcorp GARC. The DARCs oversee how operational management monitors compliance with the Bidcorp group policies and guidelines in respect of the financial reporting process, the system of internal control, the management of financial risks, the audit process (both internal and external) and code of ethics. The DARCs are assisted in their oversight role by Bidcorp internal audit. Internal audit undertakes both regular and ad hoc reviews of financial and operational risk management controls and procedures, the results of which are reported quarterly to the respective DARC and consolidated for quarterly reporting to the Bidcorp GARC.

(a) Credit risk
 

Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the group’s receivables from customers, investments and guarantees.

The GARC has implemented a “Delegation of authority matrix” which provides guidelines to the divisions as to the level of authorisation required for various types of transactions.

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the group’s maximum exposure to credit risk after taking into account the value of any collateral obtained. The carrying values, net of impairment allowances and expected credit losses, amount to R13 390 million (2018: R13 391 million) for trade receivables (refer note 7.4 for credit risk disclosure), and R192 million (2018: R149 million) for investments (refer note 9.2).

The expected credit loss in respect of trade receivables is used to record expected impairment losses unless the group is satisfied that no recovery of the amount owing is possible; at that point, the amount which is considered irrecoverable is written off directly against the respective assets.

Impairments of investments classified at fair value through other comprehensive income or amortised cost are written off against the investment directly and an impairment allowance account is not utilised.

The group has a general credit policy of dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. In accordance with the decentralised structure, the operational management is responsible for implementation of credit policies to meet the above objective. This includes credit policies under which new customers are analysed for creditworthiness before the operation’s standard payment and delivery terms and conditions are offered, determining whether collateral is required, and if so the type of collateral to be obtained, and setting of credit limits for individual customers based on their references and credit ratings. Many operations in the group have a policy of taking out credit insurance to cover a portion of their risk. Operational management are also held responsible for monitoring the operations’ credit exposure.

(b) Liquidity risk
 

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

The group manages its borrowings centrally for each of the segments. The divisions within each segment are therefore not responsible for the management of liquidity risk but rather senior management for each of these segments is responsible for implementing procedures to manage the regional liquidity risk.

  Undiscounted contractual cash flows  
  Carrying
amount
R’000
Total
R’000
6 months
or less
R’000
6 – 12
months
R’000
1 – 2 years
R’000
2 – 5 years
R’000
More than
5 years
R’000
 
Contractual maturities of financial liabilities, including interest payments                
2019                
Vendors for acquisition   379 026   380 521   57 157   46 949   250 188   26 227   –  
Puttable non-controlling liabilities (refer note 10.4)   1 462 748   1 587 111   1 086 829   43 241   231 590   225 451   –  
Borrowings (refer note 10.3)                
Loans secured by mortgage bonds over fixed property   273 865   284 654   12 403   11 169   27 871   45 494   187 717  
Loans secured by lien over certain property, plant and equipment in terms of financial leases and suspensive sale agreements   519 768   548 388   132 996   68 659   150 659   180 404   15 670  
Unsecured loans 9 707 316 9 829 089 3 411 868 2 414 272 525 600 3 468 903 8 446  
  10 500 949 10 662 131 3 557 267 2 494 100 704 130 3 694 801 211 833  
Trade and other payables (refer note 7.6) excluding forward exchange contracts and value added taxation liability   18 536 715   18 536 715   18 536 715   –   –   –   –  
2018                
Vendors for acquisition 535 024 535 024 160 747 73 962 256 337 43 978  
Puttable non-controlling liabilities (refer note 10.4)   1 478 590   1 491 881   1 088 519   34 219   143 692   225 451   –  
Borrowings (refer note 10.3)                
Loans secured by mortgage bonds over fixed property   218 139   237 349   8 907   8 885   17 760   30 637   171 160  
Loans secured by lien over certain property, plant and equipment in terms of financial leases and suspensive sale agreements   615 019   647 973   153 502   79 619   158 744   242 516   13 592  
Unsecured loans 8 726 327 8 984 613 2 159 852 1 273 922 3 456 016 2 041 214 53 609  
  9 559 485 9 869 935 2 322 261 1 362 426 3 632 520 2 314 367 238 361  
Trade and other payables (refer note 7.6) excluding forward exchange contracts and value added taxation liability   18 673 870   18 673 870   18 673 870   –   –   –   –  

The expected maturity of financial liabilities is not expected to differ from the contractual maturities as disclosed above. There were no defaults or breaches of any of the borrowing terms or conditions.

  2019
R’000
    2018
R’000
 
Undrawn facilities          
The group has the following undrawn facilities at its disposal to further reduce liquidity risk:          
Unsecured bank overdraft facility, reviewed annually and payable on 360 days’ notice   1 598 506       1 542 493  
   Utilised 56 471     7 852  
   Unutilised 1 542 035     1 534 641  
Unsecured loan facility with various maturity dates through to 2026 and which may be extended by mutual agreement   11 622 479       10 942 582  
   Utilised 9 499 104     8 535 073  
   Unutilised 2 123 375     2 407 509  
Secured loan facilities with various maturity dates through to 2035 and which may be extended by mutual agreement   560 155       703 327  
   Utilised 377 922     431 490  
   Unutilised 182 233     271 837  
Other banking facilities 630 057     615 259  
   Utilised 2 140     200 272  
   Unutilised 627 917     414 987  
Total utilised facilities 9 935 637     9 174 687  
Total unutilised facilities 4 475 560     4 628 974  
Total facilities 14 411 197     13 803 661  
(c) Market risk
 

Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Foreign currency risk

Currency risk is the possibility that the group may suffer financial loss as a consequence of the depreciation in the measurement currency relative to the foreign currency prior to payment of a commitment in that foreign currency or the measurement currency strengthening prior to receiving payment in that foreign currency. The group also has translation risk arising from the consolidation of foreign operations into South African rand.

  Statement of comprehensive
income (average)
Statement of financial
position (spot)
 
Currency conversion guide at June 30 2019 2018 2019 2018  
Rand/sterling 18,35 17,27 17,82 18,06  
Rand/euro 16,18 15,30 15,97 16,00  
Rand/Australian dollar 10,14 9,94 9,87 10,15  
Rand/New Zealand dollar 9,51 9,17 9,44 9,30  
Rand/Hong Kong dollar 1,81 1,64 1,80 1,75  
Rand/Singapore dollar 10,39 9,56 10,39 10,07  
Rand/Czech koruna 0,63 0,60 0,63 0,62  
Rand/Polish zloty 3,77 3,67 3,78 3,62  
Rand/Brazilian real 3,67 3,87 3,65 3,56  
Rand/US dollar 14,18 12,81 14,04 13,73  

Borrowings are matched to the same foreign currency as the division raising the liability thereby limiting the divisions’ exposure to changes in a foreign currency which differs to their functional currency. Interest on borrowings is denominated in currencies that match the cash flows generated by the underlying divisions of the group thereby providing an economic hedge for each class of borrowing.

The group incurs currency risk as a result of purchases and sales which are denominated in a currency other than that entities’ functional reporting currency. It is group policy that group entities hedge all trade receivables and trade payables denominated in a foreign currency which differs to its functional currency. At any point in time the entities also take out economic hedges over their estimated foreign currency exposure resulting from sales and purchases. The group entities hedge their foreign currency risk exposure either by taking out forward exchange contracts (FECs) or alternatively by purchasing in advance the foreign currency which will be required to settle the trade payables. Most of the forward exchange contracts have maturities of less than one year after the reporting date. Where necessary, the forward exchange contracts are rolled over at maturity. It is the group’s policy not to trade in derivative financial instruments for speculative purposes.

Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies (in relation to the operations’ functional currency) and for which no hedge accounting is applied are recognised in the statement of profit or loss. Both the changes in fair value of the forward exchange contracts and the foreign exchange gains and losses relating to the monetary items are recognised in operating profit (refer note 4.2).

The periods in which the cash flows associated with the forward exchange contracts are expected to occur are detailed below under the heading “Settlement”. The periods in which the cash flows are expected to impact profit or loss are believed to be in the same time frame as when the actual cash flows occur.

    Contract value  
  Settlement Foreign 
amount 
000’s 
  Rand 
amount 
000’s 
 
In respect of forward exchange contracts relating to foreign liabilities as at June 30 2019          
Euro July 2019 to October 2019 (5 659)   (91 403)  
US dollar July 2019 to October 2019 (6 641)   (94 913)  
Sterling July 2019 (9)   (171)  
        (186 487)  
In respect of forward exchange contracts relating to foreign assets as at June 30 2019          
US dollar August 2019 to August 2020 41 997    575 698   
Euro April 2020 12 000    185 084   
        760 782   
In respect of forward exchange contracts relating to goods and services ordered not accounted for as at June 30 2019          
US dollar July 2019 to February 2020 (7 654)   (108 088)  
Euro July 2019 to September 2019 (933)   (14 961)  
Norwegian krone July 2019 to August 2019 (2 067)   (3 357)  
Australian dollar July 2019 (115)   (1 155)  
        (127 561)
In respect of forward exchange contracts relating to foreign liabilities as at June 30 2018          
Euro July 2018 to September 2018 (2 886)   (45 114)  
US dollar July 2018 to August 2018 (2 788)   (35 955)  
Canadian dollar July 2018 to August 2018 (20)   (202)  
Australian dollar July 2018 to August 2018 (21)   (216)  
        (81 487)  
In respect of forward exchange contracts relating to foreign assets as at June 30 2018          
US dollar July 2018 to September 2018 3 749    35 704   
Australian dollar July 2018 to August 2018 980    9 873   
Canadian dollar July 2018 200    2 069   
        47 646   
In respect of forward exchange contracts relating to goods and services ordered not accounted for as at June 30 2018          
US dollar July 2018 to October 2018 (3 007)   (39 830)  
Euro July 2018 to October 2018 (1 759)   (27 657)  
Norwegian krone July 2018 (1 013)   (1 654)  
Australian dollar July 2018 to August 2018 (46)   (467)  
        (69 608)  

Interest rate risk

The group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. This risk is managed by maintaining an appropriate mix between fixed and floating borrowings and by the use of interest rate swap contracts. Investments in equity securities accounted for as held-for-trading financial assets and trade receivables and payables are not exposed to interest rate risk.

  2019 
R’000 
  2018 
R’000 
 
At the reporting date the interest rate profile of the group’s interest-bearing financial instruments was:        
Fixed rate instruments        
   Financial liabilities        
      Borrowings (4 491 670)   (4 833 980)  
      Puttable non-controlling interest liabilities (1 462 748)   (1 478 590)  
      Derivative instruments in designated hedge accounting relationships (9 851)   (10)  
   Financial assets        
      Derivative instruments in designated hedge accounting relationships 3 638    5 890   
Variable rate instruments        
   Financial assets        
      Cash and cash equivalents 5 775 863    5 964 802   
   Financial liabilities        
      Borrowings (6 009 279)   (4 725 505)  

The group’s exposure to interest rates on financial assets and liabilities are detailed in the various notes within the financial statements.

The variable rates are influenced by movements in the prime borrowing rates.

Sensitivity analysis

Group borrowings have been categorised by geographical location and the percentage change used for each category has been selected based on what could reasonably be expected as a change in interest rates within that region based on historical movements in interest rates within that particular region.

This sensitivity analysis has been prepared using the average borrowings for the financial year as the actual borrowings at June 30 are not representative of the borrowings during the year. This analyses assumes that all other variables, in particular foreign currency rates, remain constant. The analyses are performed on the same basis as 2018. A decrease in interest rates would have an equal and opposite effect on profit after taxation as detailed below.

  2019 2018  
  Increase in
interest rates
%
Decrease
in profit after
taxation
R’000
  Increase in
interest rates
%
Decrease
in profit after
taxation
R’000
 
Southern Africa and other Emerging Markets 0,50 8 861   0,50 8 361  
United Kingdom and Europe 0,25 3 714   0,25 2 347  
Australasia 0,25 1 749   0,25 1 646  
    14 324     12 354  

Equity price risk

Equity price risk arises from investments classified at fair value through profit or loss or investments classified at fair value as other comprehensive income (refer note 9.2). Unlisted investments comprise unlisted shares and loans are valued at fair value using a price earnings (PE) model. A sensitivity analysis for investments at fair value was not performed as the fair value balance is insignificant.

(d) Fair values
 

The carrying amounts of all financial assets and liabilities approximate their fair values, with the exception of borrowings which have been accounted for at amortised cost. The fair value of borrowings, together with the carrying amounts shown in the statement of financial position, classified by class (being geographical location), are as follows:

  2019 2018  
  Carrying
amount
R’000
    Fair value
R’000
    Carrying
amount
R’000
    Fair value
R’000
 
Borrowings (refer note 10.3)                      
Southern Africa and other Emerging Markets 2 830 550     2 830 534     2 749 411     2 745 051  
   Loans secured by lien over certain property, plant and equipment in terms of financial leases and suspensive sale agreements   7 327       7 327       4 990       4 990  
   Unsecured loans 2 823 223     2 823 207     2 744 421     2 740 061  
United Kingdom and Europe 6 702 380     6 702 348     5 879 875     5 878 662  
   Loans secured by mortgage bonds over fixed property 273 865     273 865     218 139     218 139  
   Loans secured by lien over certain property, plant and equipment in terms of financial leases and suspensive sale agreements   512 442       512 442       610 029       610 029  
   Unsecured loans 5 916 073     5 916 041     5 051 707     5 050 494  
Australasia                      
   Unsecured loans 968 019     968 019     930 199     930 199  
  10 500 949     10 500 901     9 559 485     9 553 912  
Unrecognised gain 48           5 573        

The methods used to estimate the fair values of financial instruments are discussed in note 3. The interest rates used to discount cash flows, in order to determine fair values, are based on market-related rates at June 30 2019 plus an adequate constant credit spread, and range from 0,0% to 30,0% (2018: 0,0% to 24,8%).

Fair value hierarchy

When measuring the fair value of an asset or a liability, the group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques categorised as follows.

  • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
  • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
  • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

  Non-current assets (liabilities)     Current assets (liabilities)  
R’000 Puttable 
non- 
controlling 
interests 
Investments Vendors for 
acquisition 
    Puttable 
non- 
controlling 
interests 
Vendors for 
acquisition 
Total   
June 30 2019                  
Financial assets measured at fair value   –    55 115   –        –    –    55 115   
Financial liabilities measured at fair value   (336 620)   –   (275 144)       (1 126 128)   (103 882)   (1 841 774)  
June 30 2018                  
Financial assets measured at fair value –  56 288 –      –  –  56 288   
Financial liabilities measured at fair value   (356 522)   –   (300 315)       (1 122 068)   (234 709)   (2 013 614)  
  Total  Level 1 Level 2      Level 3       
June 30 2019                  
Financial assets measured at fair value 55 115  –      55 115       
Financial liabilities measured at fair value (1 841 774) –      (1 841 774)      
June 30 2018                  
Financial assets measured at fair value 56 288  –      56 288       
Financial liabilities measured at fair value (2 013 614) –      (2 013 614)      

Valuation techniques and significant unobservable inputs

The following table shows the valuation techniques used in measuring the puttable non-controlling interests and vendors for acquisition fair values at June 30.

Valuation technique   Significant unobservable inputs   Inter-relationship between significant unobservable inputs and fair value measurement

The expected payments are determined by considering the possible scenarios of forecast EBITDAs, the amount to be paid under each scenario and the probability of each scenario. The valuation models consider the present value of expected payment, discounted using a risk-adjusted discount rate

 
  • EBITDA growth rates: 3% – 35% (2018: 5% – 15%)
  • EBITDA multiples : 5,8x – 10x (2018: 5,5x – 8,5x)
  • Risk-adjusted discount rate: 1,99% – 9,0% (2018: 0,5% – 9,0%)
 

The estimated fair value would increase (decrease) if:

  • the EBITDA were higher (lower); or
  • the risk-adjusted discount rate were lower (higher).
     2019 
R’000 
    2018 
R’000 
 
10.2 Net finance costs          
   Finance income 109 506      84 502   
     Interest income on bank balances 91 867      72 886   
     Interest income on advances 11 930      7 859   
     Interest imputed on post-retirement assets 5 709      3 757   
  Finance charges (395 448)     (312 414)  
     Interest expense on bank borrowings (316 881)     (251 150)  
     Interest expense on bank overdrafts (39 389)     (16 075)  
     Interest expense on provisions and tax liabilities (23 191)     (27 086)  
     Unwinding of discount on puttable non-controlling interest liabilities (6 000)     (10 217)  
     Interest expense on financed assets (5 289)     (5 207)  
     Interest imputed on post-retirement obligations (4 698)     (2 679)  
    (285 942)     (227 912)  
 

Finance charges comprise interest payable on borrowings calculated using the effective interest method. The interest expense component of finance lease payments is recognised in the statement of profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of assets that take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially complete or sold.

Capitalisation is suspended during extended periods in which active development is interrupted. All other borrowing costs are expensed in the period in which they are incurred.

  2019 
R’000 
  2018 
R’000 
 
Finance income received per the consolidated statement of cash flows        
Income per the statement of profit or loss   109 506      84 502   
Interest imputed on post-retirement obligations (5 709)   (3 757)  
Amounts received 103 797    80 745   
Finance charges paid per the consolidated statement of cash flows        
Charge per the statement of profit or loss   (395 448)     (312 414)  
Unwinding of discount on puttable non-controlling interest liabilities 6 000    10 217   
Interest imputed on post-retirement obligations and provisions 14 123    8 009   
Amounts capitalised to borrowings 8 715    –   
Amounts paid (366 610)   (294 188)  
     2019 
R’000 
  2018 
R’000 
 
10.3 Borrowings        
   Loans secured by mortgage bonds over fixed property (refer note 7.1) 273 865    218 139   
  Loans secured by lien over certain property, plant and equipment in terms of financial leases and suspensive sale agreements (refer note 7.1)   519 768      615 019   
  Unsecured borrowings 9 707 316    8 726 327   
  Borrowings 10 500 949    9 559 485   
  Less short-term portion of borrowings (5 841 624)   (3 489 012)  
  Long-term portion of borrowings 4 659 325    6 070 473   
  Schedule of repayment of borrowings        
     Year to June 2019 –    3 489 012   
     Year to June 2020 5 841 624    4 061 934   
     Year to June 2021 879 764    885 849   
     Year to June 2022 3 265 923    283 569   
     Year to June 2023 205 453    491 357   
     Year to June 2024 111 035    151 576   
     Thereafter 197 150    196 188   
    10 500 949    9 559 485   
  Total borrowings comprise        
     Foreign subsidiaries borrowings 9 530 328    8 633 572   
     South African subsidiary borrowings 970 621    925 913   
    10 500 949    9 559 485   
      %      %   
  Effective weighted average rate of interest on        
  South African borrowings excluding overdrafts 8,3%    8,0%   
  Foreign borrowings excluding overdrafts 2,6%    2,4%   
           
    R'000    R'000   
  Movement in borrowings        
  Carrying value at beginning of year 9 559 485    8 057 464   
  Borrowings raised during the year 5 135 168    5 381 256   
  Borrowings repaid during the year (4 232 742)   (4 711 152)  
  Interest capitalised during the year 8 715    –   
  On acquisition of business 7 801    271 219   
  Currency adjustment 22 522    560 698   
    10 500 949    9 559 485   
 
  Currency Nominal
interest rate
Financial year
of maturity
  2019 
R’000 
    2018 
R’000 
 
Terms and debt repayment schedule                  
Terms and conditions of outstanding loans were:                  
Borrowings of South African subsidiaries                  
   Unsecured loans ZAR 8,3 2020   970 622      925 913   
Borrowings of foreign subsidiaries         9 530 327      8 633 572   
Loans secured by mortgage bonds over fixed property   EUR   1,3 – 4,8   2021 – 2031     247 772        184 894   
  GBP 2,2 – 2,7 2020 – 2035   25 207      28 188   
  CZK 1,9 2020   886      5 057   
Loans secured by lien over certain property, plant and equipment in terms of financial leases and suspensive sale agreements   EUR   0,8 – 8,0   2020 – 2026     391 252        488 522   
  PLN 2,4 2022 – 2024   112 839      110 186   
  GBP 3,0 – 9,6 2020 – 2023   8 350      11 153   
  BRL 4,1 – 4,9 2020 – 2023   5 476      5 158   
  MYR 3,1 – 3,6 2024   1 851      –   
Unsecured loans EUR 0,3 – 3,1 2020 – 2026   4 120 907      3 858 183   
  HKD 3,2 – 5,2 2020   1 820 805      1 836 908   
  GBP 2,0 -2,5 2020 – 2022   1 604 757      995 384   
  SGD 2,6 – 3,1 2020   554 760      561 757   
  RMB 5,8 2020   139 294      84 980   
  CLP 4,0 – 5,0 2020 – 2022   115 886      68 282   
  CZK 5,3 2020   104 077      102 747   
  AED 0,0 – 5,0 2020   92 929      47 345   
  PLN 2,4 2024   52 156      61 656   
  USD 3,8 – 5,8 2020   46 253      80 320   
  TRY 15,2 – 30,0 2020 – 2024   29 418      57 215   
  Other 3,0 – 5,4 2020 – 2023   55 452      45 637   
Total interest-bearing borrowings         10 500 949      9 559 485   

The expected maturity dates are not expected to differ from the contractual maturity dates.

Capital management

The group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

The principal covenant limits are net debt to EBITDA of no more than 2,5 times and interest cover of no less than 5 times (both excluding the impacts of IFRS 16). Compliance with the group’s biannual debt covenants is monitored on a monthly basis and formally tested at December 31 and June 30. During the year, all group covenants have been complied with and based on current forecasts it is expected that such covenants will continue to be complied with for the foreseeable future.

The group’s operations generate a high and consistent level of free cash flow which helps fund future development and growth. The group seeks to maintain an appropriate balance between the higher shareholder returns that may be possible with higher levels of borrowings and the prudence afforded by a sound capital position to enable the group to capitalise on growth opportunities, both internal and external. There were no changes to the group’s approach to capital management during the year and the group is not subject to any externally imposed capital requirements.

10.4 Puttable non-controlling interest liabilities
 

The put options entitle the non-controlling shareholders to sell their holdings in the subsidiaries to the group at contracted dates and amounts. The effect of granting these put options on the group’s results can be summarised as follows:

  2019 
R’000 
  2018 
R’000 
 
Balance at beginning of year 1 478 590    1 195 196   
Arising on the granting of put options to non-controlling interests during the year 70 464    246 192   
Payments made to non-controlling interest during the year (74 428)   (74 782)  
Remeasurement of put options during the year (12 963)   (2 801)  
Unwinding of present value discount recognised to the statement of profit or loss 6 000    10 217   
Exchange rate adjustments (4 915)   104 568   
  1 462 748    1 478 590   
Long-term portion 336 620    356 522   
Short-term portion 1 126 128    1 122 068   

At the beginning of the year the group had the following put options with non-controlling shareholders:

Distrubuzione Alimentari Convivenze SPA (DAC)

The non-controlling shareholders have the option to put their 40% interest in DAC to the group on or about September 30 2019. The discount rate used for the DAC put option was 1,99% (2018: 1,99%).

Quartiglia Food Service S.p.A. (Quartiglia)

The non-controlling shareholders have the option to put their 40% interest in Quartiglia to the group from July 1 2020 to June 30 2021.

Guzmán Gastronomía and Cuttings (Guzman)

The non-controlling shareholders have the option to put their 10% interest in Guzman to the group, at 8,5 times EBITDA less net debt on or about June 30 2021. The discount rate used for the Guzman put option was 2,0% (2018: 2,0%).

Frustock Foodservice, S.A. (Frustock)

The non-controlling shareholders have the option to put their 20% interest in Frustock to the group, using a market valuation formula on or about June 30 2020. The discount rate used for the Frustock put option was 1,65% (2018: 1,65%).

Cárnicas Sáenz, S.L. (Saenz)

The non-controlling shareholders have the option to put their 20% interest in Saenz to the group, using a market valuation formula on or about June 30 2022. The discount rate used for the Saenz put option was 1,65% (2018: 1,65%).

Pier 7 Holding GMBH (Pier7)

The non-controlling shareholders have the option to put their 30% interest in Pier7 to the group, at 8 times EBITDA less net debt on or about June 30 2021. The discount rate used for the Pier7 put option was 2,0% (2018: 2,0%).

Bidfood Malaysia Sdn. Bhd. (Aeroshield)

The non-controlling shareholders have the option to put their 15% interest in Aeroshield to the group, at an average of last two years profit after tax times 7 on or about June 30 2022. The discount rate used for the Aeroshield put option was 5,7% (2018: 5,7%).

Famous Fresh Proprietary Limited (Bidfresh SA)

The non-controlling shareholders have the option to put their 30% interest in Bidfresh SA to the group, using a market valuation formula on or about June 30 2021. The discount rate used for the Bidfresh SA put option was 9,0% (2018: 9,0%).

Acquisitions during the year resulted in the following put options being granted to the following non-controlling shareholders:

Punjab Kitchen Proprietary Limited (Punjab Kitchen)

The non-controlling shareholders have the option to put their 10% interest in Punjab Kitchen to the group, at 10 times EBITDA less net debt on or about June 30 2021. The discount rate used for the Punjab Kitchen put option was 2,0%.

Put options held by non-controlling interests in the group’s subsidiaries entitle the non-controlling interest to sell its interest in the subsidiary to the group at predetermined values and on contracted dates. In such cases, the group consolidates the non-controlling interest’s share of the equity in the subsidiary and recognises the fair value of the non-controlling interest’s put option, being the present value of the estimated future purchase price, as a financial liability in the statement of financial position. In raising this liability, the non-controlling interest is derecognised and any excess or shortfall is charged or realised directly in retained earnings in the statement of changes in equity.

The unwinding of the present value discount on these liabilities is recorded within finance charges in the statement of profit or loss using the effective interest method. The financial liability is fair valued at the end of each financial year and any changes in the value of the liability as a result of changes in assumptions used to estimate the future purchase price are recorded directly in retained earnings in the statement of changes in equity.