That annual payout could lead to more than growing pains in the future.
Bashing the banks is all the rage right now - and it has its place - but too many companies have only themselves to blame for the interest they're struggling to service. A survey completed by P-E International's Dennis Henry shows that, with the recession eating deep into profits, they have hiked up dividends, diminishing the income retained to fuel growth. A quick dash to the black horse provides temporary relief, but swallows up subsequent profits and the cycle continues, with debt piling up.
Take Central Television, currently basking in the glow of its successful gamble for the Midlands in the recent franchise fights. Between 1987 and 1990, Central's pre-tax profits nearly halved, but dividend payments grew by 34%. The latest dividend represents 65% of its profit before tax (PBT). On this sort of showing it's no surprise that retained profits are down, and borrowing up, by 800%.