Network Rail- so how does this work??

[GodStar]

Network Rails yearly performance is announced -

 

"Pre-tax profit rose to £471m in the year to the end of March, from £438m the previous year.

 

But net debt also increased to £27.28bn from £25.05bn. Network Rail's debt is guaranteed by the government."

 

How does this work? They are twenty seven thousand million pounds in debt (which we the tax payer will pick up if things go t*ts up), yet they still make a 'profit'??

 

Despite this commendable performance...()

 

"The bosses waived their bonuses...The company could not say, however, if Higgins and fellow executives will continue to share in a long-term bonus scheme that could be worth up to £15.6m over the next three years for the rail group's six executive directors. The six will also earn £2.3m a year in salaries plus a maximum of £4.2m in bonuses."

[HeadingNorth]

Pre-tax profit is quite often less than the amount of tax payable. Or, they might be counting "profit before we pay interest on our huge debt..."

[Resident]

I would say the debt is a separate entity to the company's bank balance, much in the same way as if you had a bank loan.

 

If you owed £1000 on your bank loan (debt) and you were paid from your employer £500, assuming your bank balance was zero you would be +£500 (profit)on your balance. It's then from that profit you would pay towards the debt.

 

At least that's how I think it works, someone with a financial background may correct this.