Groups Profitability, Investment Levels and Debt Position - Essay Example

 These values and trends indeed represent a complex economy as it can be seen that in addition to the company’s sliding profitability at the end of the five year period, the regulatory constraints to seem to have taken a toll on its profitability, in turn affecting its provisions and its capability to invest in future by banking on its capital market. Lack of effective strategies to tackle the changing market environment in terms of capital, infrastructure, innovation, operations, etc.

have also affected the company’s profitability in the long run. . In 2001 the company made a loss but the dividend was paid. Why should the company feel it necessary to make such a payment? The company has maintained a dividend payment of 26.9 p through 2001 from 2000 although it made a loss of 534 ?m during the same period. First, the decision of the board to pay the dividend was to keep both its stakeholders and shareholders happy as this could help the company become more competitive in the marketplace while still attracting capital in spite of its poor performance in the recently concluded year.

Also, considering it to be the end of the first five-year control period, the company needs to cater to the interests of its shareholders as much as there is a need to attract passengers and freight to sustain in the long run. And with the company running short on investment and poor performance leading to more regulatory constraints and lesser competitiveness, the company runs the risk of alienating its investors in the second five-year control period. Also, the company needs to attract more capital to be able to improve its assets, performance, and rail network maintenance, foster innovation and competitiveness among its franchisees and sustain the positive trend in the passenger and freight incomes.

Giving a dividend of 26.9 p is also necessary to project a positive impression and a sense of control among its shareholders as well as its other stakeholders particularly after the fatal accidents in 1997, 1999, and 2000. In spite of the underinvestment, poor performance, and the lack of effective strategies, the company still required to pull on into the next control period as the agreed government grants and the ?2 billion facility loan availability give it scope to adjust its debt record and improve its