152 MEGACHEM LIMITED Notes to The Financial Statements 31 December 2024 29. Financial instruments: information on financial risks and other explanatory information (cont’d) 29G. Foreign currency risk (cont’d) The Company’s currency exposure is as follows (cont’d): Company Exposure in USD Others Total 2023 $’000 $’000 $’000 Financial assets Cash and bank balances 766 3 769 Trade and other receivables 15,288 2,930 18,218 Subtotal 16,054 2,933 18,987 Financial liabilities Trade and other payables 3,681 508 4,189 Borrowings 13,383 1,596 14,979 Subtotal 17,064 2,104 19,168 Net financial (liabilities)/assets and net currency exposure (1,010) 829 (181) Sensitivity analysis: The effect on pre-tax profit of the Group and Company is not material. The Company has certain investments in foreign operations, whose net assets are exposed to currency translation risk. The Company does not hedge such currency translation risk. 29H. 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. Under loans granted by a bank to a subsidiary, the Group is required by bank to observe certain financial covenants such as a minimum consolidated tangible networth of $30 million and a maximum consolidated leverage ratio of 1.0. The Group monitors its capital regularly to ensure these covenants are not breached. In addition, the Group seeks to maintain maximum gearing ratio of 0.6 internally to minimise financial risks. The bank defines leverage ratio as total bank borrowings divided by total tangible networth and shareholders’ networth as aggregate of paid up capital and revenue reserves. Group 2024 2023 Total borrowings ($’000) 25,241 28,489 Total tangible networth ($’000) 58,548 49,962 Leverage ratio 0.43 0.57 The Group and the Company are in compliance with all externally imposed capital requirements for the reporting years ended 31 December 2024 and 31 December 2023.
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