Maxis Berhad | Annual Report 2013

159 OVERVIEW OUR BUSINESS STRATEGIC REVIEW CORPORATE GOVERNANCE FINANCIAL STATEMENTS Maxis Berhad Annual Report 2013 OTHER INFORMATION 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 percent 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 2013 and 31 December 2012. The Group also 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 (include loan from a related party, current and non-current borrowings and derivative financial instruments 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 2013 and 31 December 2012 were as follows: GROUP NOTE 2013 2012 RM’000 RM’000 Total interest bearing financial liabilities 7,524,528 7,311,577 Less: Cash and cash equivalents 27 (807,946) (967,498) Net debt 6,716,582 6,344,079 Total equity 6,016,816 7,057,305 Gearing ratios 1.1 0.9 The increase in the gearing ratio as at 31 December 2013 is primarily due to the additional borrowings drawn down during the financial year and reduction in total equity.