The Group’s four main sources of funds are operating cash flows, secured loans, convertible bonds and equity. The major factors influencing future cash balances are operating cash flows, sale and purchases of dry bulk vessels and drawdown and repayment of borrowings.
As part of the ordinary activities of the Group, the Treasury function actively manages the cash and borrowings of the Group to ensure sufficient funds are available to meet the Group’s commitments and an appropriate level of liquidity is maintained during different stages of the shipping cycle.
Over the long term, the Group aims to maintain a consolidated net gearing of no greater than 50% – defined as the ratio of net borrowings to net book value of property, plant and equipment – which we believe is appropriate over all stages of the shipping cycle.
As at 31 December 2017:
The split of current and long-term cash, deposits and borrowings is analysed as follows:
|Cash and deposits||244.7||269.2||-9%|
|Current portion of long-term borrowings||(104.1)||(95.7)|
|Net borrowings to shareholders' equity||55%||55%|
|Net borrowings to net book value of property, plant and equipment KPI||35%||34%|
|Net working capital||136.8||160.6||-15%|
Treasury is permitted to invest in a range of cash and investment products subject to limits specified in the Group Treasury Manual. These include overnight and term deposits, money market funds, liquidity funds, certificates of deposit and structured notes.
Treasury enhances Group income by investing in a mix of financial products, based on the perceived balance of risk, return and liquidity. Cash, deposits and investment products are placed with a range of leading banks, mainly in Hong Kong.
The Group’s cash and deposits at 31 December 2017 comprised US$236.9 million in United States Dollars and US$7.8 million in other currencies. They are primarily placed in liquid deposits of three months or less and saving accounts. This maintains liquidity to meet the Group’s working capital needs.
During the year, Treasury achieved a 1.6% return on the Group’s cash.