41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
(c) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the Group’s and of the Company’s financial
instruments will fluctuate 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 fixed and floating 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 profit net of tax would have been RM723,575 (2013: RM826,940) higher/lower, arising mainly as a result of lower/
higher interest expense on floating 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 flows of a financial instrument will fluctuate because
of changes in foreign exchange rates.
The Group has five subsidiaries abroad; a hospital in Jakarta, Indonesia and Bangladesh, and an aged care facility in
Queensland, Australia and a pharmaceutical distributor in Singapore. The Group does not face significant exposure from
currency risk as these subsidiaries operate independently. Hence, transactions involving foreign currency are minimal and
risks are limited to the translation of foreign currency functional financial statements to that of the presentation currency.
42. 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 maximises 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.
292
KPJ Healthcare Berhad annual report
2014
Notes to the
Financial Statements
For the financial year ended 31 December 2014 (continued)
