Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

More documents

Recommendations

Info

Financial Risk Management Continued A Financial risk factors continued ii) Credit risk The Group’s credit risk is primarily attributable to deposits with banks, credit exposures to customers and derivative financial instruments with a positive fair value. The Group has credit policies in place and the exposures to these credit risks are monitored on an ongoing basis. The Group manages its cash balances with banks and financial institutions and transactions involving derivative financial instruments by monitoring credit ratings, capital adequacy ratios, and limiting the aggregate risk to any individual counterparty. The utilization of credit limits is regularly monitored. At 31st December 2008 cash balances with banks and financial institutions amounted to US$515 million (2007: US$492 million), of which over 99% (2007: 99%) were made to financial institutions with credit ratings of no less than A- (Fitch). Similarly transactions involving derivative financial instruments are with banks with sound credit ratings and capital adequacy ratios. At 31st December 2008, there was no positive fair value of derivative financial instruments (2007: US$0.2 million). Management does not expect any counterparty to fail to meet its obligations. In respect of credit exposures to customers, the Group has policies in place to ensure that sales on credit without collateral are made principally to travel agents and corporate companies with an appropriate credit history. Sales to other customers are made in cash or by major credit cards. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet after deducting any impairment allowance. The Group’s exposure to credit risk arising from debtors is set out in note 14 and totals US$61.3 million (2007: US$69.3 million). The Group has no exposure to credit risk arising from exposure to derivative financial instruments with a positive fair value (2007: US$0.1 million). The Group’s exposure to credit risk arising from bank balances totals US$515 million (2007: US$492 million). iii) Liquidity risk Prudent liquidity risk management includes managing the profile of debt maturities and funding sources, maintaining sufficient cash and marketable securities, and ensuring the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. The Group’s ability to fund its existing and prospective debt requirements is managed by maintaining diversified funding sources with adequate committed funding lines from high quality lenders, and by monitoring rolling short-term forecasts of the Group’s cash and gross debt on the basis of expected cash flows. In addition, long-term cash flows are projected to assist with the Group’s long-term debt financing plans. At 31st December 2008, total available borrowing facilities amounted to US$804 million (2007: US$848 million) of which US$661 million (2007: US$677 million) was drawn down. Undrawn committed facilities, in the form of revolving credit and term loan facilities, totaled US$143 million (2007: US$171 million) in addition to its cash balances of US$515 million (2007: US$492 million). An ageing analysis of the Group’s financial liabilities based on the remaining period at the balance sheet to the contractual maturity dates is included in notes 15, 16 and 26. 42 Mandarin Oriental International Limited
B Capital management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern whilst seeking to maximize benefits to shareholders and other stakeholders. Capital is equity as shown in the consolidated balance sheet plus net debt. The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, purchase Group shares, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the Group’s consolidated gearing ratio and consolidated interest cover. The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings less bank balances and other liquid funds. Interest cover is calculated as operating profit (excluding gain on disposal and the writeback of impairment) before interest and tax (including the Group’s share of operating profit from associates and joint venture) divided by net financing charges (including the Group’s share of net financing charges from associates and joint venture). The Group does not have a defined gearing or interest cover benchmark or range. The ratios at 31st December 2008 and 2007 based on IFRS balance sheets are as follows: 2008 2007 Gearing ratio 15% 16% Interest cover 4.6 5.6 The decrease in interest cover for the year ended 2008 compared with 2007 was primarily due to lower cash flows generated by Group companies. The slight decrease in the gearing ratio for the year then ended was due to lower net debt. C Fair value estimation The fair value of listed investments is based on quoted market prices. The quoted market price used for listed investments held by the Group is the current bid price. The fair values of current debtors, bank balances and other liquid funds, current creditor and current borrowings are assumed to approximate their carrying amount due to the short-term maturities of these assets and liabilities. The fair values of long-term borrowings are based on market prices or are estimated using the expected future payments discounted at market interest rates. The fair value of interest rate swaps and caps is calculated by reference to the present value of the estimated future cash flows, taking into account current interest rates as observed from the market. The fair value of forward foreign exchange contracts is determined using forward exchange market rates of the same remaining tenor at the balance sheet date. Annual Report 2008 43
Page 1: Mandarin Oriental International Lim
Page 4 and 5: Contents 1 Corporate Overview 3 Cor
Page 6 and 7: Highlights Mandarin Oriental Intern
Page 8 and 9: Chairman’s Statement Overview Des
Page 10 and 11: Group Chief Executive’s Review Bu
Page 12 and 13: Group Chief Executive’s Review Co
Page 14 and 15: Group Chief Executive’s Review Co
Page 16 and 17: Operating Summary There are 23 hote
Page 18 and 19: Development Portfolio Mandarin Orie
Page 20 and 21: International Recognition Continued
Page 22 and 23: Financial Review Continued In 2008,
Page 24 and 25: Financial Review Continued Cash flo
Page 26 and 27: Financial Review Continued Treasury
Page 28 and 29: Directors’ Profiles Continued Lor
Page 30 and 31: Consolidated Balance Sheet as at 31
Page 32 and 33: Consolidated Cash Flow Statement fo
Page 34 and 35: Principal Accounting Policies Conti
Page 42 and 43: Financial Risk Management A Financi
Page 46 and 47: Critical Accounting Estimates and J
Page 48 and 49: Notes to the Financial Statements 1
Page 50 and 51: Notes to the Financial Statements C
Page 76 and 77: Principal Subsidiaries, Associates,
Page 78 and 79: Independent Auditor’s Report To t
Page 80 and 81: Responsibility Statement The Direct
Page 82 and 83: Corporate Governance Continued Dire
Page 84 and 85: Corporate Governance Continued Dire
Page 86 and 87: Principal Risks and Uncertainties C
Page 88 and 89: Mandarin Oriental Hotel Group Conta
Page 90 and 91: Sales and Reservations Offices Mand
Page 92: Mandarin Oriental International Lim

Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

Create successful ePaper yourself

Delete template?

Save as template?