Yinson Annual Report 2020

60 Yinson Holdings Berhad SECTION 4 OUR CAPITALS NATURAL SOCIAL & RELATIONSHIPS HUMAN ORGANISATIONAL MANUFACTURED FINANCIAL Net Gearing Ratio (calculated as ‘Total Loans and Borrowings’ less ‘Cash and Bank Balances plus liquid investments’ divided by ‘Total Equity’) is widely accepted as a key indicator of an entity’s financial health and accepted by the Group’s lenders. This ratio is actively monitored and managed, and is a result of a combination of selecting viable projects, establishing a sensible project and equity funding structure, and discipline in the creation of cash reserves for loan repayment. This ratio typically spikes during the project execution period but improves once the project has achieved lease commencement as the loan repayment begins and cash reserves are built up throughout the loan tenure. Meanwhile, the difference between Gearing Ratio and Net Gearing Ratio is the absence of ‘Cash and Bank Balances plus liquid investments’, with Gearing Ratio as a less meaningful interpretation of the Group’s leveraging position as it excludes liquid assets. While gearing ratios outline the degree of which the Group has financed its business through loans and borrowings compared against its equity, the Management assesses the repayment ability of its loans and borrowings through the Adjusted Net Debt/Adjusted Core EBITDA ratio. This ratio indicates the number of years taken for one of the key annual earnings of the Group to repay outstanding loans and borrowings, net of liquid assets (i.e. Cash and Bank Balances plus liquid investments), with a lower ratio being more favourable. These Group ratios will increase in the coming years in tandem with the project execution funding needs of the FPSO Anna Nery project. To ensure a balanced and healthy financial position for the Group, the Management will continuously assess and determine the appropriate gearing ratios for the Group and balance its levels with equity fundraising proposals to shareholders where necessary. LEVERAGE INDICATORS Gearing Ratio (times) 1.01 0.87 1.14 1.41 0.73 FYE 2020 FYE 2019 FYE 2018 FYE 2017 FYE 2016 Adjusted Net Debt/ Adjusted Core EBITDA (times) 2.86 2.07 2.73 5.89 4.07 FYE 2020 FYE 2019 FYE 2018 FYE 2017 FYE 2016 Net Gearing Ratio (times) FYE 2020 FYE 2019 FYE 2018 FYE 2017 FYE 2016 Adjusted Net Debt (RM’000) 1,779,136 3,135,655 2,242,175 1,853,782 2,474,508 FYE 2020 FYE 2019 FYE 2018 FYE 2017 FYE 2016 0.63 0.51 0.87 1.14 0.52