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## Note 52 – Financial instruments 

## (a) Capital risk management 

The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an appropriate capital structure of debt and equity. 

In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity’s overall capital management strategy remains unchanged from 2010. 

The capital structure of the consolidated entity consists of net debt (borrowings as detailed in Notes 25 and 29 offset by cash and cash equivalents as detailed in Note 11) and total equity of the consolidated entity (comprising issued capital, reserves and retained earnings as detailed in Notes 33, 34 and 35). 

The consolidated entity monitors capital on the basis of the gearing ratio and funds from operations (FFO) to interest expense cover. 

The gearing ratio is calculated as net debt divided by adjusted total capital. Net debt is calculated as total borrowings, adjusted for cross currency swap hedges and deferred borrowing costs, less cash and cash equivalents. Adjusted total capital is calculated as total equity less the hedging reserve plus net debt. The gearing ratio at the reporting date was as follows: 

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FFO to interest expense cover is calculated as FFO divided by net interest expense. FFO is calculated as earnings before interest, tax, depreciation and amortisation (EBITDA), less significant items, changes in fair value of derivative financial instruments, share of profits of associates and jointly controlled entities using the equity method, plus dividends received and less income tax paid. Net interest expense includes finance costs capitalised and excludes unwinding of discount on provisions. FFO to net interest expense cover at the reporting date was as follows: 

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