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Notes to the Financial Statements
31 December 2015
33 FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Capital risk management
The Group’s and the Company’s objective when managing capital is to safeguard the Group’s and the Company’s abilities to continue as a
going concern while at the same time provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group and the Company may adjust the amount of dividends paid to shareholders,
issue new shares or return capital to shareholders.
Under the requirement of Bursa Malaysia Securities Berhad Practice Note No. 17/2005, the Company is required to maintain a consolidated
shareholders’ equity of more than 25% of the issued and paid-up capital (excluding treasury shares) and maintain such shareholders’ equity
of not less than RM40 million. The Company has complied with this requirement.
The Company is also required by the external lenders to maintain financial covenant ratios on Group net debt to Group EBITDA and Group
EBITDA to Group interest expense. These financial covenant ratios have been fully complied with by the Company for the financial years
ended 31 December 2015 and 31 December 2014.
The Group also monitors capital which comprise of borrowings and equity on the basis of the gearing ratio. This ratio is calculated as net
debt divided by total equity. Net debt is calculated as total interest bearing financial liabilities (include loan from a related party, current and
non-current borrowings and derivative financial instruments designated in hedging relationship on borrowings on a net basis as shown in
the statements of financial position but exclude deferred payment scheme as disclosed in Note 29 to the financial statements) less cash and
cash equivalents. Total equity is calculated as ‘equity’ as shown in the statements of financial position. The gearing ratios at 31 December
2015 and 31 December 2014 were as follows:
Group
Note
2015
RM’000
2014
RM’000
Total interest bearing financial liabilities
9,129,563
8,798,355
Less: Cash and cash equivalents
27
(1,296,448)
(1,530,519)
Net debt
7,833,115
7,267,836
Total equity
4,220,516
4,737,767
Gearing ratio
1.9
1.5
The increase in the gearing ratio as at 31 December 2015 is primarily due to the additional borrowings drawn down during the financial year
and reduction in total equity.
