Tor plc is a large company listed on the main market of the London Stock Exchange.

The objectives of the company, in the current year and in recent years, are stated by its Annual Report to be as follows:

(1) To maximise the wealth of our shareholders

(2) To give shareholders an annual return of 15% per year

(3) To increase real dividends by 4% per year The shares of Tor plc are owned as follows:

(a) Using the information provided, evaluate the recent performance of Tor plc and discuss the extent to which the company has achieved its declared financial objectives.

(b) Critically discuss how the problem of agency may be reduced in a company listed on the London Stock Exchange, illustrating your answer by referring to the information provided about Tor plc.

Transcribed Image Text:

% Chief executive officer Managing director 17 6 Other directors 4 UK institutional investors 44 Foreign institutional investors 10 Small shareholders 19 100 The following information relates to the recent performance of Tor plc. Year 2005 2006 2007 2008 2009 Turnover (m) 144 147 175 183 218 Earnings per share (pence) 46.8 50.7 53.3 53.7 63.7 Dividend per share (pence) 18.7 20.0 21.4 22.9 24.5 Annual inflation (%) 2.5 2.7 3.1 2.9 Price/earnings ratio (times) 8 8 10 13 15 Average values for 2009 for Tor plc's business sector are: Dividend yield: Total shareholder return: Price/earnings ratio: 4.2% 35% 14 times