Airways Annual Report 2019



B1  FINANCIAL RISK MANAGEMENT Airways is exposed to a number of financial risks, which are managed through setting appropriate objectives and implementing prudent policies and controls. These objectives, policies and controls are managed through Airways’ Treasury Policy and summarised below. Liquidity risk In the short term, Airways is exposed to liquidity risk through timing differences between: cash receipts from sales or facility drawdowns; and cash requirements for current capital expenditure and business operating costs. In addition, Airways is also exposed to liquidity risk in the long term through the potential unavailability of debt funding to finance future capital expenditure, business developments and loan repayments. Airways’ primary objective in managing liquidity risk is to ensure there is sufficient liquidity and funding capacity to cover known, and a reasonable level of unforeseen, funding requirements. The policies that have been established to meet this objective include: 1) Maintaining sufficient, short term funding capacity to accommodate the worst case short-term event (currently defined as a delay of one month’s revenue due to an inability to invoice customers e.g. as a result of a system or other process failure); 2) Ensuring debt facilities have the provision to accommodate 10% surplus funding over and above the projected maximum level of debt for the next three years, based on the most up to date forecasts; 3) Ensuring all facility renewals are secured at least three months prior to maturity, with the decision to re- negotiate or tender banking arrangements being made 12 months before maturity; and 4) Remaining 100% compliant with banking covenants at all times. To ensure these policies are adhered to, Airways operate the following controls: • Maintaining and monitoring cash-flow forecasts monthly, to provide views on monthly, quarterly and annual cash-flow requirements; • Maintaining debt funding in at least three tranches to ensure funds can be drawn down monthly; and • Monitoring compliance with banking covenants monthly and reporting semi-annually to banking providers. Airways has two bank funding facilities. The key terms of these facilities are set out in the table below: Amount Total facility 2019 2019 Drawdowns 2018 Remaining term Interest rate $60 million $50 million $10 million $40 million 3 years (expires June 2021) Floating $30 million - - - 5 years (expires February 2024) Floating All banking covenants relating to interest coverage, levels of shareholder funds and gearing ratios which are in place for the drawn down facility have been complied with throughout the financial year (2018: full compliance). Neither funding facility is secured by Airways’ assets. Airways’ exposure to liquidity risk is represented by the maturity profile of financial liabilities, as shown below. These cashflows are shown at their undiscounted, contractual values.


Made with FlippingBook - Online Brochure Maker