Maxis Berhad | Annual Report 2012

Maxis Berhad // Annual Report 2012 178 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 (“Bursa Malaysia”) Practice Note No. 17/2005, the Company is required to maintain a consolidated shareholders’ equity of more than 25 percent of the issued and paid up capital (excluding treasury shares) and maintain such shareholders’ equity 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 2012, 31 December 2011 and 1 January 2011. The Group monitors capital 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 (including loan from a related party, current and non-current borrowings and derivative financial instruments on a net basis, and current and non-current trade payables as shown in the statements of financial position and Note 29 to the financial statements respectively) 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 2012, 31 December 2011 and 1 January 2011 were as follows: Group Note 31.12.2012 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 Total interest bearing financial liabilities 7,311,577 6,331,063 5,497,409 Less: Cash and cash equivalents 27 (967,498) (838,125) (897,621) Net debt 6,344,079 5,492,938 4,599,788 Total equity 7,057,305 8,088,384 8,666,699 Gearing ratios 0.90 0.68 0.53 The increase in the gearing ratio as at 31 December 2012 is primarily due to the additional borrowings drawn down during the financial year. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012 Continued