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Annual Report 2013
KPJ HEALTHCARE BERHAD
253
39.
Financial risk management objectives and policies (continued)
(c)
Interest rate risk
Interest rate risk is the risk that the fair value of future cash ows of the Group’s and of the Company’s nancial instruments will
uctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings. The Group’s policy
is to manage interest cost using a mix of xed and oating rate debts.
Sensitivity analysis for interest rate risk
At the reporting date, if interest rates had been 10 basis points lower/higher, with all other variables held constant, the Group’s
pro t net of tax would have been RM826,940 (2012: RM471,571) higher/lower, arising mainly as a result of lower/higher interest
expense on oating rate loans and borrowings. The assumed movement in interest rate for interest rate sensitivity analysis is based
on the currently observable market environment.
(d)
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash ows of a nancial instrument will uctuate because of changes
in foreign exchange rates.
The Group has three subsidiaries abroad; a hospital in Jakarta, Indonesia, an aged care facility in Queensland, Australia and a
pharmaceutical distributor in Singapore. The Group does not face signi cant exposure from currency risk as these subsidiaries
operate independently; pharmaceutical drugs and medical supplies are supplied from and distributed in the country these
subsidiaries operate. Hence, transactions involving foreign currency are minimal and risks are limited to the translation of foreign
currency functional nancial statement to that of the presentation currency.
40.
Capital management
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 maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. 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 gross gearing ratio, which is total borrowings divided by shareholders’ funds.
The Group’s gross gearing ratios as at 31 December 2013 and 2012 were as follows:
Group
Company
2013
2012
2013
2012
RM’000
RM’000
RM’000
RM’000
Current borrowings
358,622
206,627
275,000
120,000
Non-current borrowings
668,870
385,469
-
-
Total
1,027,492
592,096
275,000
120,000
Shareholders’ funds
1,087,546
1,030,903
514,655
496,859
Gearing ratio
0.94
0.57
0.53
0.24
Notes to the
Financial Statements
For the financial year ended 31 December 2013
(continued)