36. Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating
and healthy capital ratios in order to support its business and maximise shareholders’ value.
The Groupmanages its capital structure andmakes adjustments to it, in light of changes in economic conditions.
To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return
capital to shareholders or issue new shares. No changes were made to the objectives, policies or processes
during the financial years ended 31 December 2015 and 2014.
The Group monitors capital using a gearing ratio, which is derived by dividing the amount of borrowings over
shareholders’ equity. At the reporting date, the Group’s gearing ratio is 0.42 times (2014: 0.37 times). The
Group’s policy is to keep gearing within manageable levels.
In respect of banking facilities with a financial institution, the Company is committed to maintain a gearing
ratio of not more than 1.0 time and Debt Service Cover Ratio (DSCR) of at least 1.25 times. Gearing ratio is
calculated by dividing the Group’s borrowings over the shareholders’ funds and DSCR is calculated by dividing
earnings before interest, taxes, depreciation and amortisation over interest paid or due in previous 12 months.
The Company has not breached these covenants.
37. Segment information
The Group is essentially involved in plantation operations and also provides plantations consultancy.
Management controls the Group’s operations by geographical locations where resources are allocated and
monitored for achievement of the desired output. Internal monthly management reports are prepared and
performance are reviewed on the basis of geographical segments. Thus, operating segments are best
segregated as follows:
(a) Plantation Segment
Plantation operations cover the cultivation of oil palms and production of crude palm oil and palm kernel.
The Group’s plantations are located in Peninsular Malaysia, Sabah and Sarawak.
(b) Others Segment
The others segment consists of plantations consultancy and investing activities.
The performance of each operating segment is measured on the basis of operating results before interest
income and finance cost. Non-recurring items such as gains on disposal of plantation assets, impairment
losses, share of results of Associates and fair value gains or losses are excluded from the measurement of a
segment’s performance.
Transactions between operating segments are undertaken on arm’s length basis. Inter-segment revenue
namely plantation management fees are eliminated on consolidation. The Group practices central fund
management where surplus funds within the Group are on-lent and the interest charges arising from such
arrangements are eliminated in full.
n otes to th e f i nan c i a l statements
Bo ustead plantati o ns Berhad
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