Limni Co Mark FieldingPritchard mefielding com 1 Profit

Limni Co Mark Fielding-Pritchard mefielding. com 1

Profit Calculation Revenue 600 Profit 138 Depreciation (55) Operating Profit 83 Dividend 19 Tax (26) 76 mefielding. com 2

Part A Dividend Policy Financing M&M say it is irrelevant Practice shows investors prefer dividends Internally generated funds usually considered to be the best Payment of one off may signal future dividends Insignificant levels of debt, assets are available for security Equity issues used to raise funds in the past mefielding. com Risk Specialist Treasury Department Use of derivative instruments 3

Dividend Policy All 3 companies have very high pay out ratios. Theta pays a fixed 40 % Stability depends on profits rising smoothly Company needs to be in a cash generative industry Omega 60%+ Dividends rising faster than profits, almost certainly unsustainable Share price could collapse if the dividend is cut Possibly indicative of few good projects Kappa about 25% Seems to be the most stable Shows good increase in profitability mefielding. com 4

Dividend Capacity Slide 2 Profit after tax 83 Depreciation 55 Reinvestment (67) 71 71 Gross Dividend 19 x Current capacity 90 Required Capacity 99 Therefore 28/74%= 38 Net dividend received after wht =30 mefielding. com Tax 26% (x x 26%) 99 5

Share buy back Signals excess cash Shareholders can reinvest Possible shortage of projects mefielding. com 6