Megachem Limited Annual Report 2015 121 Notes to the Financial Statements 31 December 2015 25. Financial instruments: information on financial risks (cont’d) 25G. Liquidity risk – financial liabilities maturity analysis (cont’d) The following table analyses the Group’s and the Company’s derivative financial instruments for which contractual maturities are essential for understanding of the timing of cash flows by remaining contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Group Company 2015 2014 2015 2014 $’000 $’000 $’000 $’000 Gross settled currency forwards - Receipts 7,735 5,063 1,078 – - Payments (7,765) (5,031) (1,069) – Financial guarantee contracts – At the end of the reporting year, no claims on the financial guarantee are expected. All the corporate guarantees provided are disclosed in Note 26. The underlying bank facilities mature within 2 years (2014: 2 years). The Group and Company manage the liquidity risk by maintaining sufficient cash balances and the availability of funding through an adequate amount of committed credit facilities. 25H. Capital risk The Group’s objectives when managing capital are to safeguard the Group’s ability to continue its business operations as a going concern and to maintain an optimal capital structure so as to maximise shareholders’ value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or reduce borrowings. The Company is required by banks to observe certain financial covenants such as a minimum consolidated tangible networth of $30 million and a maximum consolidated leverage ratio of 1.0. The Company monitors its capital regularly to ensure these covenants are not breached. In addition, the Group seeks to maintain maximum gearing ratio of 0.5 internally to minimise financial risks. The banks define leverage ratio as total bank borrowings liabilities divided by total tangible networth and shareholders’ networth as aggregate of paid up capital and revenue reserves. Group Company 2015 2014 2015 2014 Total borrowings ($’000) 18,269 21,919 9,830 15,114 Total tangible networth ($’000) 42,196 41,923 20,689 19,044 Leverage ratio 0.43 0.52 0.48 0.79 The Group and the Company are in compliance with all externally imposed capital requirements for the reporting years ended 31 December 2015 and 2014.
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