74
HOTEL ROYAL
̛Ө
ROYAL MEMORIES
5. Liquidity Risk
Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as
they fall due.
As at 31 December 2015, the Company’s total current liabilities exceeded total current assets by $0.3
million due to the utilsation of short term credit facility with attractive interest rate. In 2014, the Company
has net current assets of $0.7 million due to restructuring of short term bank loans to long-term bank loans
during the year.
The Group’s net current asset of 31 December 2015 was $4.4 million (2014: $3.1 million).
Management assesses the availability of credit facilities and compliance with loan covenants on an on-
going basis and no matters have been drawn to its attention that the roll-over of the short-term financing
may not be forthcoming or that covenants have been breached. The Group and the Company have
unutilised credit facilities totaling $177.9 million (2014: $151.9 million) and $91.6 million (2014: $106.3 million)
respectively.
From time to time, management evaluates the tenure of credit facilities including the need for longer term
credit facilities.
6. Capital Risk
The Group manages its capital to ensure that entities in the Group will be able to continue as a going
concern while maximising the return to stakeholders through the optimisation of the debt and equity
balance. The capital structure of the Group consists of equity comprising share capital disclosed in Note
22, reserves and retained earnings; and debt which comprise bank borrowings and leases disclosed in
Notes 16, 18 and 20.
The Group reviews the capital structure on an annual basis. As a part of this review, the Group considers
the cost of capital and the risks associated with each class of capital. The Group seeks to balance its
overall capital structure through the payment of dividends, new share issues and share buy-backs as well
as the obtaining of new debts, refinancing or redemption of existing debts.
The Group’s overall strategy remains unchanged from 2014. The bank loans require the Group to comply
with certain covenants such as debt to security ratio. The Group is compliant with these covenants.
General Business Risks
The Group’s businesses are subject to general business risks. They are as follows:
a. War and terrorism, and its adverse effect on business;
b. The spread of contagious diseases and their adverse effect on tourist arrivals;
c. Global recession and its effect on the performance of the local economy; and
d. Changes in government regulations that burden the Group’s operating costs or restrict business.
It is recognised that such risks can never be eliminated totally and that the cost controls in minimising these
risks may outweigh their potential benefits. Accordingly the Group continues to focus on risk management and
incident management. Where appropriate, this is supported by risk transfer mechanism such as insurance.
RISK FACTORS AND RISK MANAGEMENT
