Finance Costs

Finance Costs by Nature

Average
interest rate
Balance at
31 December
Finance costs (Increase)/ decrease
US$ Million P/L Cash 2018 2018 2017
Secured borrowings
     (including realised interest rate swap costs)
Convertible bonds (Note)

4.0%
5.7%

4.0%
3.3%

840.9
120.2

28.4
6.5

29.1
6.4

3%
(2%)
KPI4.2% KPI3.9% 961.1 34.9 35.5 2%
Other finance charges 1.0 0.5
Total finance costs
Interest cover (calculated as EBITDA divided by total gross finance costs)
35.9
KPI6.0X
36.0
3.7x
0%

The KPIs on which management focuses to assess the cost of borrowings are average interest rates for different types of borrowings and the Group’s interest cover (see table above).

The Group aims to achieve a balance between floating and fixed interest rates on its long-term borrowings. This is adjusted from time to time, depending on the interest rate cycle, using interest rate swap contracts where appropriate. During the year, all our interest rate swap contracts qualified for hedge accounting as cash flow hedges and US$0.2 million of interest rate swap contract income were realised. As at 31 December 2018, 58% (2017: 65%) of the Group’s long-term borrowings were on fixed interest rates. As at 31 December 2019 and 2020, we expect about 51% and 43% respectively of the Group’s existing long-term borrowings will be on fixed interest rates.

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