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AFRICAN DAWN ANNUAL REPORT 2020

Notes to the Financial Statements continued
Annual Financial Statements For the year ended 29 February 2020

Interest rate risk

The sensitivity analyses below has been determined based on the exposure to interest rates for non-derivative instruments at the statement
of financial position date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the statement of
financial position date was outstanding for the whole year. A 50 (2019:100) basis points increase or decrease is used when reporting interest
rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If
interest rates had been 50 (2019: 100) basis points higher or lower and all other variables were held constant, the Group’s loss for the
period would change by R 57,408 (2019: 220,300) company: (R4,820) (2019: R17,200).

A 50 (2019: 100) basis points increase would increase revenue on unsecured lending by an estimated Group R109,343 (2019: R292,500).
A 50 (2019: 100) basis points increase would increase finance costs on borrowings linked to prime by an estimated R51,935 (2019: R72,200)
company R4,820 (2019: - )(refer to note 13).
A 50 (2019: 100) basis points increase would increase interest income on cash and cash equivalents by an estimated R2,055 (2019: R17,200).
Capital risk management

The group's objective when managing capital (which includes share capital, borrowings, working capital and cash and cash equivalents) is to
maintain a flexible capital structure that reduces the cost of capital to an acceptable level of risk and to safeguard the group's ability to continue
as a going concern while taking advantage of strategic opportunities in order to maximise stakeholder returns sustainably.
The group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain the capital structure, the group may adjust the amount of dividends paid to the shareholder, return capital
to the shareholder, repurchase shares currently issued, issue new shares, issue new debt, issue new debt to replace existing debt with different
characteristics and/or sell assets to reduce debt.

The capital structure and gearing ratio of the group at the reporting date was as follows:

Group Group Company Company
2020 2019 2020 2019
R’000 R’000 R’000 R’000
Borrowings 9,761 7,205 338 409
Lease liabilities 1,909 - - -
Loans from directors 626 2,820 626 2,820
Trade and other payables 2,588 2,022 1,251 571
Total borrowings 14,884 12,047 2,215 3,800
Less Cash held (411) (2,388) (12) (7)
Net borrowings 14,473 9,659 2,203 3,793
Equity (2,902) 6,623 7,701 16,803
Gearing Ratio 498.7% 145.8% 28.6% 22.6%

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