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SEE HUP SENG LIMITED
Annual Report 2012
94
Notes to the Financial Statements
31 DECEMBER 2012
36 Financial Instruments (Continued)
(a) Financial Risk Management Objectives and Policies (Continued)
(v) Capital risk
The Group’s objectives when managing capital are: (a) to safeguard the Group’s ability to continue
as a going concern so that it can continue to provide returns for shareholders and benefits for
other stakeholders, and (b) to provide an adequate return to shareholders by pricing products and
services commensurate with the level of risk.
The Group sets the amount of capital in proportion to risk. The Group manages the capital
structure and makes adjustments to it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to shareholders,
issue new shares, or sell assets to reduce debt. The Group’s overall strategy remains unchanged
from 2011.
The Group is not subject to any externally imposed capital requirements.
The Group monitors capital on the basis of the net debt-to-equity ratio. This ratio is calculated as
net debt divided by equity. Net debt is calculated as total debt (excluding provision for tax and
deferred income tax) less cash and cash equivalents. Equity comprises all components of equity
(i.e. share capital, retained earnings, and reserves).
Group Company
2012 2011 2012 2011
S$’000 S$’000 S$’000 S$’000
Net debt 54,274 37,011 17,692 848
Equity 85,567 77,700 82,330 76,645
Net debt-to-equity ratio 0.634 0.476 0.215 0.011
(b) Fair Values
The carrying amounts of the Group’s and Company’s current assets and current liabilities approximate
their fair values due to their short-term maturity. The carrying amount of the Group’s long term receivables
approximate their fair values.
The fair value of Group’s and Company’s long term borrowings are calculated based on discounted
expected future principal and interest cash flows. The discount rates used are based on market rates
for similar instruments at the balance sheet date. As at 31 December 2012 and 31 December 2011, the
fair value of long term borrowings approximate their carrying amounts.