138
139
Annual Report 2018
Notes to the consolidated financial statements – continued For the year ended 31 December 2018
Notes to the consolidated financial statements – continued For the year ended 31 December 2018
28. FINANCIAL INSTRUMENTS (continued)
28. FINANCIAL INSTRUMENTS (continued)
28.4 Financial Risk Management (continued)
28.4 Financial Risk Management (continued)
28.4.1. Credit risk (continued)
28.4.3 Market risk (continued)
Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors on an annual basis. Limits are designed to minimize risk concentration and decrease financial loss through the inability of the counterparty to make the payments. The maximum exposure to credit risk for the components of the consolidated statement of financial position is the carrying amounts shown in note 28 except for financial guarantees and derivative financial instruments.
Sensitivity analysis for variable rate financial instruments The following table demonstrates the sensitivity of income to reasonably possible changes in commission rate on Sukuk and long term loans, with all variables held constant.
2018
2017
Profit rate Increase by 100 base points Decrease by 100 base points
28.4.2. Liquidity risk
102,518 (102,518)
99,602
Liquidity risk represents the Group’s difficulties in providing funds to meet commitments associated with financial instruments. The Group’s liquidity risk management policy is to ensure that sufficient liquidity and financing are available to meet its liabilities when due. The amounts in the table below represent contractual undiscounted cash flows:
(99,602 )
2018 Within 3 months 3 to 12 months 1 to 5 years More than 5years No fixed maturity
Total
Other price risk Price risk is the risk that the value of a financial instrument will fluctuate due to changes in market prices, whether those changes are due to factors related to the instrument or its source, or which affect all instruments traded in the market. The Group diversifies its investment portfolio to manage price risk arising from its equity investments.
Short term loans Long term loans
96,000 332,819
-
-
-
- - -
96,000
554,997
3,185,265 3,900,000
2,198,536
6,271,617 3,900,000
28.4.4 Capital management
Sukuk
-
-
- -
Trade payable and other current liabilities
For the purpose of the Group’s capital management, capital includes issued capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments in 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 Group monitors capital using a debt ratios, which is net debt divided by total capital plus net debt. The Group includes within net debt, Sukuk and long-term loans, trade and other payables, less cash and short-term deposits.
455,391 884,210
352,787 907,784
17,326
47,836 47,836
873,340
7,102,591 2,198,536
11,140,957
2017 Within 3 months 3 to 12 months 1 to 5 years More than 5years No fixed maturity
Total
Long term loans
281,296
793,993
3,181,590
2,175,203 3,900,000
- -
6,432,082 3,900,000
Sukuk
-
-
-
2018
2017
Trade payable and other current liabilities
520,038 801,334
107,906 901,899
26,992
-
40,011 40,011
694,947
Sukuk and long-term loan (note 18) Trade and other payables (note 20) Less: Cash and cash equivalent (note 15)
10,171,617
10,332,082
3,208,582 6,075,203
11,027,029
873,340 (470,034)
694,947
The Company has unutilized credit facilities of SAR 1,234 million as at 31 December 2018 (31 December 2017: SAR 2,154 million) to meet liquidity requirements.
(1,084,733) 9,942,296 9,918,031 9,918,031 19,860,327
Net Debt
10,574,923 9,819,301 9,819,301 20,394,224
28.4.3 Market risk
Total equity Total capital
Currency risk Currency risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s principal transactions are carried in Saudi Riyal, United States Dollar, and United Arab Emirates Dirham. The Group’s management believes that currency risk is not significant since the exchange rate of Saudi Riyal is pegged against those currencies. Commission rate risk Commission rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the market commission rates. The Group is subject to commission rate risk on its commission rate bearing assets and liabilities, including bank deposits and loans. The Group manages its exposure to commission rate risk by continuously monitoring movements in commission rates. The Group had executed CAP commission options to hedge the fluctuation in the commission rates. Market risk is the risk that the fair value or the future cash flows of a financial instrument may fluctuate as a result of changes in market prices. Market risk comprises of three types of risk: currency risk, commission rate risk and other price risk.
Capital and net debt
51.85%
50.06%
Gearing ratio
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