2011 Annual Report and Accounts - Investing In Africa

Notes to the Financial Statements (continued)
4 Financial risk management (continued)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, issue new capital or sell assets to reduce debt.
During 2011 the Group’s strategy, which was unchanged from 2010, was to maintain a gearing ratio between 25%
and 40%. The gearing ratios at 31 December 2011 and 2010 were below the preferred gearing ratios as follows:
2011 2010
Shs’000
Shs’000
Total borrowings 2,126,066 1,625,281
Less: cash and cash equivalents (403,114) (1,049,247)
Net debt 1,722,952 576,034
Total equity 8,046,824 7,496,385
Total capital 9,769,776 8,072,419
Gearing ratio 18% 7%
5 Segment information
Management has determined the operating segments based on the reports reviewed by the Managing Director that
are used to make strategic decisions.
The Managing Director considers the business from both a geographic and product perspective. Geographically,
management considers the performance in Kenya and Tanzania. Kenya is further segregated into hotels and lodges.
The reportable operating segments derive their revenue primarily from accommodation, food and beverage sales.
The Managing Director assesses the performance of the operating segments based on profits before depreciation
and amortisation, interest and tax, which is a measure of adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA). The measure also excludes the effects of unrealised gains/losses on financial instruments.
Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central
treasury function, which manages the cash position of the Group.
60 TPS EASTERN AFRICA LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS 2011