McConnell Dowell 2020 Annual Review

91 Annual Review 2020 Liquidity risk Liquidity risk is the risk that the Group and parent is unable to meet its financial obligations as they fall due. The Group’s objective is to maintain a balance between operational cash flow and the use of external funding through bank overdrafts and available lines of credit. The Group’s policy is to minimise the use of available lines of credit, keep interest costs to a minimum, whilst still maintaining an adequate cash balance to meet working capital requirements. Contracts in progress and contract receivables, are carried at cost, plus profit recognised, less billings and recognised losses at balance sheet date. Progress billings not received are included in contract debtors due to the contractual right associated with the amounts. Where progress billings exceed the aggregate of costs, plus profit, less losses, the net amounts are shown as an increase in trade and other payables. The cash flow of the Group is exposed to execution risks on construction projects. Cash flows can also be adversely affected by clients being unwilling to resolve variations to contracts in a timely manner. The Group attempts to manage these issues in order that adequate liquidity exists. The following table reflects all contractual fixed payments for settlement, resulting from recognised financial liabilities as of 30 June 2020. Cash flows from financial liabilities without fixed amounts or timing are based on conditions existing at 30 June 2020. Trade receivables All figures are in A$ 000’s Contract Assets Current <30days 30-60days 61 -90 days > 91 days Total 30 June 2020 Estimated total gross carrying amount at default 47,192 119,577 - 537 954 6,261 174,521 Expected credit loss - - - - - - - 30 June 2019 Estimated total gross carrying amount at default 98,709 110,712 - 5,826 636 9,418 225,301 Expected credit loss - - - - - - - The Group has facilities under which various lenders/financiers provide guarantees and bonding facilities. The Group only obtains facilities from credit worthy third parties and does not consider there to be a concentration of credit risk among these parties. Receivable balances are monitored on an ongoing basis with the results being that the Group’s exposure to bad debts is not significant. The Group contracts with a number of third parties and does not consider that there is a concentration of credit risk with individual third parties. Sundry receivables are not impaired and are not past due. It is expected that these other balances will be recieved when due. Due to the short-term nature of these receivables, the carrying value is assumed to approximate their fair value. The maximum exposure to the credit risk is the fair value of the recievables.