TIDMDTY
RNS Number : 3705U
Dignity PLC
29 July 2015
For immediate release 29 July 2015
Dignity plc
Interim results for the 26 week period ended 26 June 2015
Dignity plc (Dignity or the Group), the UK's only listed
provider of funeral related services, announces its unaudited
interim results for the 26 week period ended 26 June 2015.
26 week 26 week
period period
ended ended
26 June 27 June Increase
2015 2014 per cent
--------------------------------------------- --------- --------- ----------
Revenue (GBPmillion) 158.7 133.1 19.2
Underlying operating profit(a) (GBPmillion) 59.7 45.6 30.9
Underlying profit before tax(a)
(GBPmillion) 46.5 32.3 44.0
Underlying earnings per share(b)
(pence) 74.0 46.7 58.5
Cash generated from operations(c)
(GBPmillion) 71.0 53.3 33.2
Operating profit (GBPmillion) 58.2 44.8 29.9
Profit before tax (GBPmillion) 45.0 31.5 42.9
Basic earnings per share (pence) 71.0 45.2 57.1
Interim dividend (pence) 7.14 6.49 10.0
Number of deaths 317,000 280,000 13.2
--------------------------------------------- --------- --------- ----------
(a) Underlying profit is calculated as profit excluding profit
(or loss) on sale of fixed assets and external transaction
costs.
(b) Underlying earnings per share is calculated as profit on
ordinary activities after taxation, before profit (or loss) on sale
of fixed assets, external transaction costs and exceptional items
(all net of tax), divided by the weighted average number of
Ordinary Shares in issue in the period.
(c) Cash generated from operations excludes external transaction costs.
The number of deaths was 13 per cent higher in the first half of
2015 compared with the same period in 2014, maintaining the high
level noted in the Group's Q1 trading update. As a direct
consequence, underlying operating profits were very strong at
GBP59.7 million (2014: GBP45.6 million), an increase of 31 per
cent.
The Group has acquired 46 funeral locations and has opened one
satellite location since the start of the year, representing an
aggregate investment of GBP47.2 million. This includes the
acquisition of 36 locations from Laurel Funerals for a
consideration of GBP38 million, which completed on 13 July
2015.
As a result of the high number of deaths in the first half of
2015, the Board anticipates that results for the full year will be
ahead of its expectations. Its expectations for 2016 and beyond
remain positive but unchanged as there is a strong possibility that
the number of deaths in 2016 may be significantly lower following
the very high number of deaths in 2015.
Mike McCollum, Chief Executive of Dignity plc commented:
"This has been a very strong half year for the Group. Client
service standards remain excellent and I am delighted with our
performance. We have invested GBP47.2 million in acquisitions so
far this year from cash on our balance sheet which should help to
create further value for our shareholders in the future."
For more information
Mike McCollum, Chief Executive
Steve Whittern, Finance Director
Dignity plc +44 (0) 207 466 5000
Richard Oldworth
Sophie McNulty
Robbie Ceiriog-Hughes
Buchanan +44 (0) 207 466 5000
www.buchanan.uk.com
Chairman's statement
Results
Principally as a result of the 13.2 per cent increase in the
number of deaths, this has been a very strong period for the Group,
with underlying operating profits increasing 30.9 per cent to
GBP59.7 million. Each division has performed well, with good
average incomes and cost control being maintained.
Underlying earnings per share increased 58.5 per cent to 74.0
pence per share (2014: 46.7 pence per share), reflecting the strong
operating performance and the effect of the reduction in the number
of shares in issue following the Group's Secured Note issue and
return of value last year, further details of which are available
in the 2014 Annual Report.
Basic earnings per share were 71.0 pence per share (2014: 45.2
pence per share), an increase of 57.1 per cent.
Dividends
The Group paid a final dividend of 13.01 pence per Ordinary
Share on 26 June 2015.
The Group proposes to pay an interim dividend of 7.14 pence per
Ordinary Share (2014: 6.49 pence) on 30 October 2015 to
shareholders on the register at 25 September 2015. This is a 10 per
cent increase on the previous year.
Our staff
The first half of the year has been very busy for all our staff.
Despite this, they have sought to maintain our high standards
across the entire business. This is demonstrated in our funeral
services division, with our customer surveys continuing to show
excellent feedback from our clients.
Outlook
As a result of the high number of deaths in the first half of
2015, the Board anticipates that results for the full year will be
ahead of its expectations. Its expectations for 2016 and beyond
remain positive but unchanged as there is a strong possibility that
the number of deaths in 2016 may be significantly lower following
the very high number of deaths in 2015.
Peter Hindley
Chairman
29 July 2015
Business and Financial Review
Introduction
The Group's operations are managed across three distinct
divisions: funerals, crematoria and pre-arranged funeral plans.
Funeral service revenues relate to the provision of funerals and
ancillary items such as memorials and floral tributes. Crematoria
revenues arise from cremation services and the sale of memorials
and burial plots at the Group's crematoria and cemeteries.
Pre-arranged funeral plan revenue represents amounts in respect of
marketing and administering the sale of plans.
Office for National Statistics Data
Some of the Group's key performance indicators rely on the total
number of estimated deaths for each period. This information is
obtained from the Office for National Statistics ('ONS') and helps
to provide good general background to the Group's performance.
Historically, the ONS has updated these estimates from time to
time. As in previous years, the Group does not restate any of its
key performance indicators when these figures are restated in the
following year.
Initial estimated deaths in Britain for the first half of 2015
were 317,000 (2014: 280,000), an increase of 13 per cent. This
compares to the number of deaths in the first half of 2014 being
approximately seven per cent lower than the same period in 2013.
The Group's operating results should therefore be considered in
that context.
Funeral services
At 26 June 2015, we operated a network of 729 (June 2014: 698;
December 2014: 718) funeral locations throughout the UK generally
trading under established local trading names. The change to the
portfolio reflects the acquisition of 10 additional funeral
locations and one new satellite location. An additional 36
locations were acquired on 13 July 2015 from Laurel Funerals
('Laurel').
In the first half of 2015, the Group conducted 39,500 funerals
(2014: 33,800) in the United Kingdom. Approximately two per cent of
these funerals were performed in Northern Ireland (2014: two per
cent). Excluding Northern Ireland, these funerals represent
approximately 12.3 per cent (June 2014: 11.9 per cent; December
2014: 11.7 per cent) of total estimated deaths in Great Britain.
Whilst funerals divided by estimated deaths is a reasonable measure
of our market share, the Group does not have a complete national
presence and consequently, this calculation can only ever be an
estimate.
Underlying operating profit was GBP46.6 million (2014: GBP34.3
million), 35.9 per cent ahead of last year. This strong operating
performance is primarily a consequence of the number of deaths and
therefore funerals performed. In addition, average incomes remain
robust and costs continue to be well controlled.
Crematoria
The Group operated 39 crematoria (June 2014: 39; December 2014:
39) and is the largest single operator of crematoria in Great
Britain. The Group performed 31,500 cremations (2014: 27,400) in
the period.
These volumes represent approximately 9.9 per cent (June 2014:
9.8 per cent; December 2014: 9.7 per cent) of total estimated
deaths in Great Britain.
Underlying operating profit was GBP19.5 million (2014: GBP15.2
million), an increase of 28.3 per cent. This is a strong
performance, again primarily driven by the number of deaths in the
period. Sales of memorials and other items equated to GBP261 per
cremation (H1 2014: GBP261 per cremation; FY 14: GBP262 per
cremation).
Pre-arranged funeral plans
Active pre-arranged funeral plans were approximately 354,000 at
the end of the period (June 2014: 332,000; December 2014: 348,000).
These plans continue to represent future potential incremental
business for the funeral division.
Underlying operating profits were flat on the previous half year
at GBP4.0 million, reflecting a similar number of plan sales in
each period. The Group continues to seek additional partners and to
increase funeral plan sales.
Central overheads
Central overheads relate to central services that are not
specifically attributed to a particular operating division. These
include the provision of IT, finance, personnel and Directors'
emoluments. In addition and consistent with previous periods, the
Group records centrally the costs of incentive bonus arrangements,
such as Long-Term Incentive Plans ('LTIPs') and annual performance
bonuses, which are provided to over 100 managers working across the
business.
Costs were GBP10.4 million in the period (2014: GBP7.9 million).
This includes an accrual of GBP2.8 million (2014: GBP1.2 million)
in respect of annual performance bonuses for the middle and senior
management within the business. Overall bonus arrangements are
unchanged from the prior period. The increase in the accrual
reflects the relative performance in the current period compared to
the prior period.
Corporate development activity
The Group has invested GBP9.2 million in acquiring 10
established funeral locations during the period. Following the
period end, on 13 July, the Group completed the acquisition of 36
funeral locations from Laurel, expanding the Group's geographical
footprint into new areas not previously served. Total consideration
for the Laurel locations was GBP38 million, satisfied in cash on
completion, and the Group anticipates investing capital expenditure
of GBP2.0 million in the first two years of ownership to upgrade
the acquired locations. The Group is also actively seeking
additional satellite funeral locations and expects investment to be
made in the second half of 2015 and beyond as part of this ongoing
plan.
GBP0.1 million has been invested on completing existing
crematoria and cemetery developments with a further GBP0.8 million
committed to be spent across this year and 2016 in order to
complete the projects.
The Group is also actively seeking planning permission to
develop crematoria at four locations in the United Kingdom. The
initial planning application at one of these locations has been
denied and the Group has amended and re-submitted this application.
Another of the applications has been refused and is being appealed
by the Group.
Earnings per share
Underlying earnings per share increased 58.5 per cent to 74.0
pence per Ordinary Share. This increase reflects the strong
operating performance and the effect of the reduction in the number
of shares in issue following the Group's Secured Note issue and
return of value last year, further details of which are available
in the 2014 Annual Report.
Cash flow and cash balances
The Group continues to be strongly cash generative. Cash
generated from operations, before external transaction costs, was
GBP71.0 million (2014: GBP53.3 million), reflecting the increased
operating performance.
During the period, the Group spent GBP8.8 million (2014: GBP7.2
million) on purchases of property, plant and equipment.
This is analysed as:
26 June 27
June
2015 2014
GBPm GBPm
------------------------------------------------ -------- ------
Vehicle replacement programme and improvements
to locations 5.6 5.5
Branch relocations 3.1 0.5
Development of new crematoria and cemeteries 0.1 1.2
Total property, plant and equipment 8.8 7.2
Partly funded by:
Disposal proceeds (0.5) (0.3)
------------------------------------------------ -------- ------
Net capital expenditure 8.3 6.9
------------------------------------------------ -------- ------
Capital spend on branch relocations includes the purchase of the
freehold interest of one of the Group's main service centres in
London, which became available during the period. This secures a
key support facility for the local businesses in the area, where
suitable alternative premises were scarce.
Cash balances at the end of the period were GBP123.1 million.
This includes GBP16.9 million relating to debt service payments
made on 30 June 2015.
The Group therefore continues to have sufficient cash set aside
to cover twelve months dividends and Corporation Tax payments
(amounting to approximately GBP20 million) as well as approximately
GBP77 million set aside for acquisitions of which GBP38 million was
used to fund the Laurel acquisition on 13 July 2015. The remaining
cash (approximately GBP9 million) held by the Group at the balance
sheet date is principally held for operating purposes.
Taxation
The Group's effective tax rate for 2015 is expected to be 21.5
per cent before exceptional items. The effective rate for 2016 and
beyond is expected to be approximately one per cent higher than the
headline rate of Corporation Tax for the period.
Capital structure and financing
The Group's principal source of long-term debt financing
continues to be the New Class A and B Secured Notes issued in 2014.
They are rated A and BBB respectively by both Standard & Poor's
and Fitch. The New Notes and the extinguishment of the previous
Secured Notes are described in detail in the 2014 Annual
Report.
The Board considers that maintaining a leveraged balance sheet
is appropriate for the Group, given the relatively stable and
predictable nature of its cash flows. This predictability is
reflected in the Secured Notes. The principal amortises fully over
their life and is scheduled to be repaid by 2049. The interest rate
is fixed for the life of the Secured Notes and interest is
calculated on the outstanding principal.
This has the benefit of enhancing shareholder returns, whilst
leaving sufficient flexibility to invest in the growth of the
business.
The Group's primary financial covenant under the Secured Notes
requires EBITDA to total debt service to be above 1.5 times. The
ratio at 26 June 2015 was 4.37 times (June 2014: 2.29 times;
December 2014: 10.69 times). Further details may be found in note
8.
As described in the Group's 2014 Annual Report, the Group is
also fully drawn on a GBP15.8 million Crematoria Acquisition
Facility, which is repayable in 2018, with interest fixed at
approximately 3.3 per cent pre tax.
On 16 June 2015, the Group arranged a GBP26.25 million debt
facility with the Royal Bank of Scotland. Whilst not needed for the
Laurel acquisition given the Group's strong cash balances, it is
capable of being drawn in up to six tranches with interest payable
at between 125 and 165 basis points above LIBOR (depending on the
ratio of EBITDA to gross debt). Amounts drawn under the facility
may be used by the entire Group as management sees fit. When drawn,
it will be secured against the Laurel assets and certain other
funeral assets operated outside of the Group's securitisation
structure. Any element of the facility not drawn by 16 June 2016
will be cancelled. The facility is repayable in four years' time.
Whilst undrawn, the facility will incur a non utilisation fee of
circa GBP150,000 per annum. This facility therefore provides the
Group with an efficient and flexible source of additional funding
if required.
As set out in note 8, the Group's gross amounts owing were
GBP607.1 million (June 2014: GBP427.5 million; December 2014:
GBP611.1 million). Net debt was GBP496.9 million (June 2014:
GBP355.6 million; December 2014: GBP530.3 million).
The balance sheet includes GBP591.3 million of gross amounts
owing on all Secured Notes. At the balance sheet date, the market
value of the Secured Notes was GBP614.9 million.
Post balance sheet events
Please see note 13 for further details.
Forward-looking statements
Certain statements in this Interim Report are forward-looking.
Although the Board believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
Going concern
The Directors receive and review regularly management accounts,
cash balances, forecasts and the annual budget together, with
covenant reporting. After careful consideration and mindful of the
current market conditions, the Directors confirm they are satisfied
that the Group has adequate resources to continue operating for the
foreseeable future. The Directors formally considered this matter
at the Board meeting held on 22 July 2015. For this reason, they
continue to adopt the going concern basis for preparing the Interim
Report.
Our key performance indicators
The Group uses the following key performance indicators both to
manage the business and monitor the Group's delivery against its
strategy and objectives. We monitor our performance by measuring
and tracking KPIs that we believe are important to our longer-term
success.
Group Performance
KPI KPI definitions 26 week period Developments in
ended 2015
26 June 2015
Total estimated This is as reported 317,000 The number of deaths
number of deaths by the Office of (H1 2014: 280,000) was significantly
in Britain (number) National Statistics. (a) higher than the
(FY 2014: 550,000)(b) same period in
2014.
Funeral market This is the number 12.3% Acquisition activity
share excluding of funerals performed has broadly offset
Northern Ireland by the Group in reductions in core
(per cent) Britain divided market share resulting
by the total estimated from increased
number of deaths competition. This
in Britain. has been a feature
of Dignity's business
model for many
years.
(H1 2014: 11.9%)(a)
(FY 2014: 11.7%)(b)
Number of funerals This is the number 39,500 Changes are a consequence
performed (number) of funerals performed of the total number
according to our of deaths and the
operational data. Group's market
share.
(H1 2014: 33,800)(a)
(FY 2014: 65,600)(b)
Crematoria market This is the number 9.9% No change to the
share (per cent) of cremations performed portfolio in the
by the Group divided period.
by the total estimated
number of deaths
in Britain.
(H1 2014: 9.8%)(a)
(FY 2014: 9.7%)(b)
Number of cremations This is the number 31,500 Changes are a consequence
performed (number) of cremations performed of the total number
according to our of deaths and the
operational data. Group's market
share.
(H1 2014: 27,400)(a)
(FY 2014: 53,400)(b)
Active pre-arranged This is the number 354,000 This increase reflects
funeral plans of pre-arranged (H1 2014: 332,000)(a) continued sales
(number) funeral plans where (FY 2014: 348,000)(b) activity offset
the Group has an by the crystallisation
obligation to provide of plans sold in
a funeral in the previous years.
future.
Underlying earnings This is underlying 74.0 pence This increase demonstrates
per share (pence) profit after tax (H1 2014: 46.7 the beneficial
divided by the weighted pence)(a) effect of the Group's
average number of (FY 2014: 85.8 further debt issue
Ordinary Shares pence)(b) and return of value
in issue in the to shareholders,
period. together with increased
operating profits
and a reduction
in the headline
Corporation Tax
rate.
Underlying operating This is the statutory GBP59.7 million The high number
profit (GBP operating profit (H1 2014: GBP45.6 of deaths is a
million) (or loss) of the million)(a) key driver of this
Group excluding (FY 2014: GBP84.9 operating performance.
profit (or loss) million)(b)
on sale of fixed
assets and external
transaction costs.
Cash generated This is the statutory GBP71.0 million The Group continues
from operations cash generated from (H1 2014: GBP53.3 to convert operating
(GBP million) operations excluding million)(a) profit into cash
external transaction (FY 2014: GBP104.4 efficiently, with
costs and exceptional million)(b) the high number
pension contributions. of deaths being
a key driver for
the increase.
In addition to these key performance indicators, the Group
closely monitors the results of its client surveys. Highlights of
these results can be found on page 8.
(a) H1 2014 relates to the 26 weeks ended 27 June 2014.
(b) FY 2014 relates to the 52 weeks ended 26 December 2014
(c) .
The Dignity client survey
In addition to these key performance indicators, we also closely
monitor the results of our client surveys to ensure we continue to
maintain the highest levels of excellent client service.
In the last five years, we have received over 161,000
responses.
The Client Survey Performance
Why it is important
Ensuring the highest levels of client service is one of our key
strategic objectives and is fundamental to our continued
success.
How we have performed
The results of the client survey clearly demonstrate client
service is at the heart of everything we do and the quality of our
service remains at consistently high levels.
Reputation and recommendation High standards of facilities
and fleet
99.2% (December 2014: 99.2%) 99.8% (December 2014: 99.8%)
99.2 per cent of respondents 99.8 per cent thought our premises
said that we met or exceeded were clean and tidy.
their expectations. 99.8% (December 2014: 99.8%)
98.1% (December 2014: 98.1%) 99.8 per cent thought our vehicles
98.1 per cent of respondents were clean and comfortable.
would recommend us.
Quality of service and care In the detail
99.9% (December 2014: 99.9%) 99.3% (December 2014: 99.4%)
99.9 per cent thought our 99.3 per cent of clients agreed
staff were respectful. that our staff had fully explained
99.7% (December 2014: 99.7%) what would happen before and
99.7 per cent thought our during the funeral.
staff listened to their needs 98.9% (December 2014: 99.0%)
and wishes. 98.9 per cent said that the
99.3% (December 2014: 99.2%) funeral service took place
99.3 per cent agreed that on time.
our staff were compassionate 98.8% (December 2014: 98.7%)
and caring. 98.8 per cent said that the
final invoice matched the estimate
provided
.Mike McCollum
Chief Executive
29 July 2015
Principal risks and uncertainties
How we manage risk
This section highlights the principal risks affecting the Group,
together with the key mitigating activities in place to manage
those risks.
Our approach to risk management
The Board recognises it is responsible for the Group's system of
internal control and risk management, which is designed to manage
rather than eliminate the risk of failure to achieve business
objectives and can provide only reasonable, and not absolute,
assurance against material misstatement or loss. A formal ongoing
process of identifying, evaluating and managing the significant
risks faced by the Group was in place for the period and in place
up to the date of approval of the Interim Report and is in
accordance with the UK Corporate Governance Code.
The Group manages the operational and financial risks described
through a combination of regular Board reports and also monthly and
weekly management information that is reviewed by the Executive
Directors.
Risk process
Our risk process is designed to identify, evaluate and manage
both our operational and financial risks.
Risk Governance
The full risk register is considered and readopted every six
months by the Audit Committee, who in turn recommend it to the
Board for adoption.
The principal risks and how they are managed have not changed
since the year end. These principal risks and uncertainties will
continue to affect the Group in the second half of the year.
Strategic and operational risk management
Risk and impact Mitigating activities 2015 commentary Change
------------------------------------- ---------------------------------- ----------------------- -------------
Significant reduction in the The profile of deaths The number No
death rate has historically followed of deaths is significant
There is a risk that the number a similar profile to unusually high change
of deaths in any year significantly that predicted by the but is expected
reduces. This would have a ONS, giving the Group to normalise
direct result on the financial the ability to plan over the remainder
performance of both the funeral its business accordingly. of the year
and crematoria divisions. and then follow
the ONS' medium
term expectations.
However, there
is a reasonable
chance that
2016 may see
a significant
reduction,
offsetting
the high number
of deaths in
2015.
------------------------------------- ---------------------------------- ----------------------- -------------
Nationwide adverse publicity This risk is addressed There have No
Nationwide adverse publicity by ensuring appropriate been no such significant
for Dignity could result in policies and procedures events in the change
a significant reduction in are in place, which period.
the number of funerals or are designed to ensure
cremations performed in any excellent client service.
financial period. This would These policies and procedures
have a direct result on the retain flexibility for
financial performance of that the business to serve
division. families in accordance
with local traditions.
------------------------------------- ---------------------------------- ----------------------- -------------
Ability to increase average The Group believes that Average revenues No
revenues per funeral or cremation its focus on excellent increased in significant
Operating profit growth is client service helps line with the change
in part attributable to increases to mitigate this risk. Board's expectations.
in the average revenue per
funeral or cremation. There
can be no guarantee that future
average revenues per funeral
or cremation will be maintained
or increased.
------------------------------------- ---------------------------------- ----------------------- -------------
Significant reduction in market The Group believes that Changes in No
share this risk is mitigated market share significant
It is possible that other for funeral operations were in line change
external factors, such as by reputation and recommendation with the Board's
new competitors, could result being a key driver to expectations.
in a significant reduction the choice of funeral
in market share within funeral director being used
or crematoria operations. and for crematoria operations
This would have a direct result is mitigated by difficulties
on the financial performance associated with building
of those divisions. new crematoria.
------------------------------------- ---------------------------------- ----------------------- -------------
Demographic shifts in population In such situations, There have No
There can be no assurance Dignity would seek to been no material significant
that demographic shifts in follow the population changes, with change
population will not lead to shift. satellites
a reduced demand for funeral being opened
services in areas where Dignity and businesses
operates. acquired in
appropriate
areas.
------------------------------------- ---------------------------------- ----------------------- -------------
Risk and impact Mitigating activities 2015 commentary Change
-------------------------------------- --------------------------------- --------------------- -------------
Competition There are barriers to No major changes No
The UK funeral services market entry in the funerals noted. Denials significant
and crematoria market is currently services market due of planning change
very fragmented. to the importance of applications
established local reputation for crematoria
There can be no assurance and in the crematoria in the period
that there will not be further market due to the need demonstrate
consolidation in the industry to obtain planning approval the barriers
or that increased competition for new crematoria and to entry.
in the industry, whether in the cost of developing
the form of intensified price new crematoria.
competition, service competition,
over capacity or otherwise,
would not lead to an erosion
of the Group's market share,
average revenues or costs
and consequently a reduction There are a number of
in its profitability. potential affinity partners
who could replace existing
The retention of affinity ones or add to existing
partners who sell the Group's relationships. Evidence
pre-arranged funeral plans suggests that such partnerships
is essential to the long-term can and are being developed.
development of the pre-arranged
funeral plan division. The
loss of an affinity partner
could lead to a reduction
in the amount of profit recognised
in that division at the time
of sale. Failure to replenish
or increase the bank of pre-arranged
funeral plans could affect
market share of the funeral
division in the longer-term.
-------------------------------------- --------------------------------- --------------------- -------------
Taxes There are currently No significant No
There can be no assurance specific exemptions changes noted significant
that changes will not be made under European legislation in the period. change
to UK taxes, such as VAT. for the UK on the VAT
VAT is not currently chargeable treatment of funerals.
on the majority of the Group's Any change would apply
services. The introduction to the industry as a
of such a tax could therefore whole and not just the
significantly increase the Group.
cost to clients of the Group's
services.
-------------------------------------- --------------------------------- --------------------- -------------
Regulation of pre-arranged Any changes would apply No significant No
funeral plans to the industry as a changes noted significant
Pre-arranged funeral plans whole and not just the in the period. change
are not a regulated product, Group.
but are subject to a specific
financial services exemption.
Changes to the basis of any
regulation could affect the
Group's opportunity to sell
pre-arranged funeral plans
in the future or could result
in the Group not being able
to draw down the current level
of marketing allowances, which
would have a direct impact
on the profitability of the
pre-arranged funeral plan
division.
-------------------------------------- --------------------------------- --------------------- -------------
Changes in the funding of There is considerable The latest No
the pre-arranged funeral plan regulation around insurance actuarial valuation significant
business companies which is designed, of the pre-arranged change
The Group has given commitments amongst other things, funeral plan
to pre-arranged funeral plan to ensure that the insurance trusts confirmed
members to provide certain companies meet their that the Trusts
funeral services in the future. obligations. continue to
have sufficient
Funding for these plans is The Trusts hold assets assets to meet
reliant on either insurance with the objective of their liabilities.
companies paying the amounts achieving returns slightly
owed or the pre-arranged funeral in excess of inflation.
plan Trusts having sufficient Historically, these
assets to meet their liabilities assets have been heavily
in the future. weighted towards gilts
and corporate bonds.
If this is not the case, then The Trustees, who operate
the Group may receive a lower independently of the
amount per funeral than expected Group, have advised
and thus generate lower profits. that they are implementing
a new investment strategy
covering a wider range
of assets classes. The
new strategy is intended
to enhance investment
returns for a similar
level of risk, albeit
with greater volatility.
-------------------------------------- --------------------------------- --------------------- -------------
Financial risk management
Risk and impact Mitigating activities 2015 commentary Change
------------------------------------- ----------------------------- ------------------ -------------
Financial Covenant under the The nature of the Group's The restructuring No
Secured Notes debt means that the of the Group's significant
The Group's Secured Notes denominator is now fixed debt obligations change
requires EBITDA to total debt unless further Secured provides greater
service to be above 1.5 times. Notes are issued in headroom against
If this financial covenant the future. This means the financial
is not achieved, then this that the covenant headroom covenant as
may lead to an Event of Default will change proportionately the annual
under the terms of the Secured with changes in EBITDA. debt service
Notes, which could result obligation
in the Security Trustee taking is approximately
control of the securitisation 15 per cent
group on behalf of the Secured lower.
Noteholders.
In addition, the Group is
required to achieve a more
stringent ratio of 1.85 times
for the same test in order
to be permitted to transfer
excess cash from the securitisation
group to Dignity plc. If this
stricter test is not achieved,
then the Group's ability to
pay dividends would be impacted.
------------------------------------- ----------------------------- ------------------ -------------
Consolidated income statement (unaudited)
for the 26 week period ended 26 June 2015
52 week
period
ended
26 week period 26 Dec
ended 2014
-----------------
26 Jun 27 Jun (audited)
2015 2014
Note GBPm GBPm GBPm
-------------------------------------- ----- -------- ------- ----------
Revenue 2 158.7 133.1 268.9
Cost of sales (61.0) (53.6) (109.0)
-------------------------------------- ----- -------- ------- ----------
Gross profit 97.7 79.5 159.9
Administrative expenses (39.5) (34.7) (77.0)
-------------------------------------- ----- -------- ------- ----------
Operating profit 2 58.2 44.8 82.9
Analysed as:
Underlying operating profit 2 59.7 45.6 84.9
Loss on sale of fixed assets - (0.1) (0.3)
External transaction costs (1.5) (0.7) (1.7)
-------------------------------------- ----- -------- ------- ----------
Operating profit 58.2 44.8 82.9
Finance costs 3 (13.4) (15.8) (154.8)
Analysed as:
Underlying finance costs (13.4) (15.8) (30.6)
Loss on extinguishment of Old
Notes - exceptional - - (123.2)
Elimination of swap - exceptional - - (1.0)
-------------------------------------- ----- -------- ------- ----------
Finance costs (13.4) (15.8) (154.8)
Finance income 3 0.2 2.5 4.2
-------------------------------------- ----- -------- ------- ----------
Profit/ (loss) before tax 2 45.0 31.5 (67.7)
Taxation - before exceptional
items 4 (10.0) (7.3) (13.1)
Taxation - exceptional 4 - - 25.8
Taxation 4 (10.0) (7.3) 12.7
-------------------------------------- ----- -------- ------- ----------
Profit/ (loss) for the period
attributable to equity shareholders 35.0 24.2 (55.0)
-------------------------------------- ----- -------- ------- ----------
Earnings per share for profit/ (loss) attributable
to equity shareholders
* Basic (pence) 5 71.0p 45.2p (104.0)p
* Diluted (pence) 5 70.9p 45.1p (104.0)p
Underlying earnings per share
(pence) 5 74.0p 46.7p 85.8p
Consolidated statement of comprehensive income (unaudited)
for the 26 week period ended 26 June 2015
52 week
period
ended
26 week period 26 Dec
ended 2014
-----------------
26 Jun 27 Jun (audited)
2015 2014
GBPm GBPm GBPm
--------------------------------------- -------- ------- ----------
Profit/ (loss) for the period 35.0 24.2 (55.0)
Items that will not be reclassified
to profit or loss
Remeasurement gain/ (loss) on
retirement benefit obligations 1.8 (2.4) (10.8)
Tax (charge)/ credit on remeasurement
of retirement
benefit obligations (0.4) 0.5 2.2
---------------------------------------- -------- ------- ----------
Other comprehensive gain/ (loss) 1.4 (1.9) (8.6)
---------------------------------------- -------- ------- ----------
Comprehensive income/ (loss) for
the period 36.4 22.3 (63.6)
---------------------------------------- -------- ------- ----------
Attributable to:
Equity shareholders of the parent 36.4 22.3 (63.6)
---------------------------------------- -------- ------- ----------
Consolidated balance sheet (unaudited)
as at 26 June 2015 26 Dec
2014
26 Jun 27 Jun (audited)
2015 2014
Note GBPm GBPm GBPm
----------------------------------------------- ----- -------- ------- ----------
Assets
Non-current assets
Goodwill 185.0 175.1 182.3
Intangible assets 99.1 79.6 94.2
Property, plant and equipment 194.7 187.4 192.3
Financial and other assets 10.2 10.6 10.4
----------------------------------------------- ----- -------- ------- ----------
489.0 452.7 479.2
----------------------------------------------- ----- -------- ------- ----------
Current assets
Inventories 6.2 6.6 6.5
Trade and other receivables 32.0 26.5 30.0
Cash and cash equivalents - excluding
collateralisation of Liquidity
Facility 123.1 86.3 86.5
Cash and cash equivalents - collateralisation
of
Liquidity Facility(1) - 63.2 -
Cash and cash equivalents 7 123.1 149.5 86.5
----------------------------------------------- ----- -------- ------- ----------
161.3 182.6 123.0
----------------------------------------------- ----- -------- ------- ----------
Total assets 650.3 635.3 602.2
----------------------------------------------- ----- -------- ------- ----------
Liabilities
Current liabilities
Financial liabilities - excluding
collateralisation of Liquidity
Facility 8.1 21.4 8.0
Financial liabilities - collateralisation
of Liquidity Facility(1) - 63.2 -
Financial liabilities 8.1 84.6 8.0
Trade and other payables 62.0 51.5 51.2
Current tax liabilities 7.3 6.8 -
Provisions for liabilities and
charges 1.2 1.2 1.4
----------------------------------------------- ----- -------- ------- ----------
78.6 144.1 60.6
----------------------------------------------- ----- -------- ------- ----------
Non-current liabilities
Financial liabilities 598.7 395.5 602.9
Deferred tax liabilities 17.0 26.4 13.6
Other non-current liabilities 2.9 2.7 2.6
Provisions for liabilities and
charges 5.1 3.8 4.5
Retirement benefit obligation 9.0 3.3 10.5
----------------------------------------------- ----- -------- ------- ----------
632.7 431.7 634.1
----------------------------------------------- ----- -------- ------- ----------
Total liabilities 711.3 575.8 694.7
----------------------------------------------- ----- -------- ------- ----------
Shareholders' equity
Ordinary share capital 6.1 6.0 6.1
Share premium account 4.8 22.9 2.8
Capital redemption reserve 141.7 121.6 141.7
Other reserves (6.0) (7.2) (5.5)
Retained earnings (207.6) (83.8) (237.6)
----------------------------------------------- ----- -------- ------- ----------
Total equity (61.0) 59.5 (92.5)
----------------------------------------------- ----- -------- ------- ----------
Total equity and liabilities 650.3 635.3 602.2
----------------------------------------------- ----- -------- ------- ----------
(1) In 2013, the Group forced the cash collateralisation of the
Liquidity Facility, which supports the repayment of Secured Notes
in the event of default. This followed the downgrade of RBS by
S&P. Following the Group's refinancing in October 2014 this
collateralisation is no longer required. Further information can be
found in the 2014 Annual Report.
Consolidated statement of changes in equity (unaudited)
as at 26 June 2015
Ordinary Share Capital
share premium redemption Other Retained
capital account reserve reserves earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- -------- ----------- --------- --------- -------
Shareholders' equity as at
27 December 2013 6.0 20.8 121.6 (6.4) (99.8) 42.2
Profit for the 26 weeks ended
27 June 2014 - - - - 24.2 24.2
Remeasurement loss on defined
benefit obligations - - - - (2.4) (2.4)
Tax on pensions - - - - 0.5 0.5
-------------------------------- --------- -------- ----------- --------- --------- -------
Total comprehensive income - - - - 22.3 22.3
Effects of employee share
options - - - 0.8 - 0.8
Tax on employee share options - - - 0.4 - 0.4
Proceeds from share issue(1) - 2.1 - - - 2.1
Gift to Employee Benefit Trust - - - (2.0) - (2.0)
Dividends (note 6) - - - - (6.3) (6.3)
-------------------------------- --------- -------- ----------- --------- --------- -------
Shareholders' equity as at
27 June 2014 6.0 22.9 121.6 (7.2) (83.8) 59.5
Loss for the 26 weeks ended
26 December 2014 - - - - (79.2) (79.2)
Remeasurement loss on defined
benefit obligations - - - - (8.4) (8.4)
Tax on pensions - - - - 1.7 1.7
-------------------------------- --------- -------- ----------- --------- --------- -------
Total comprehensive income - - - - (85.9) (85.9)
Effects of employee share
options - - - 1.2 - 1.2
Tax on employee share options - - - 0.5 - 0.5
Proceeds from share issue(1) 0.1 - - - - 0.1
Issue and redemption of B
Shares in respect of
Capital Option - (20.1) 20.1 - (20.1) (20.1)
Dividend in respect of Special
Dividend Option - - - - (44.3) (44.3)
Dividends (note 6) - - - - (3.5) (3.5)
Shareholders' equity as at
26 December 2014 6.1 2.8 141.7 (5.5) (237.6) (92.5)
Profit for the 26 weeks ended
26 June 2015 - - - - 35.0 35.0
Remeasurement gain on defined
benefit obligations - - - - 1.8 1.8
Tax on pensions - - - - (0.4) (0.4)
-------------------------------- --------- -------- ----------- --------- --------- -------
Total comprehensive income - - - - 36.4 36.4
Effects of employee share
options - - - 1.0 - 1.0
Tax on employee share options - - - 0.5 - 0.5
Proceeds from share issue(2) - 2.0 - - - 2.0
Gift to Employee Benefit Trust - - - (2.0) - (2.0)
Dividends (note 6) - - - - (6.4) (6.4)
-------------------------------- --------- -------- ----------- --------- --------- -------
Shareholders' equity as at
26 June 2015 6.1 4.8 141.7 (6.0) (207.6) (61.0)
-------------------------------- --------- -------- ----------- --------- --------- -------
(1) Relating to issue of 281,430 shares under 2011 LTIP scheme
and 14,896 shares under 2010 SAYE scheme.
(2) Relating to issue of 249,067 shares under 2012 LTIP scheme
and 330 shares under 2013 SAYE scheme
The above amounts relate to transactions with owners of the
Company except for the items reported within total comprehensive
income.
Capital redemption reserve
The capital redemption reserve represents GBP80,002,465 B Shares
that were issued on 2 August 2006 and redeemed for cash on the same
day and GBP19,274,610 B Shares that were issued on 10 October 2010
and redeemed for cash on 11 October 2010, GBP22,263,112 B Shares
that were issued on 12 August 2013 and redeemed for cash on 20
August 2013 and GBP20,154,070 B Shares that were issued and
redeemed for cash in November 2014.
Other reserves
Other reserves includes movements relating to the Group's SAYE
and LTIP schemes and associated deferred tax, together with a
GBP12.3 million merger reserve.
Consolidated statement of cash flows (unaudited)
for the 26 week period ended 26 June 52 week
2015
period
ended
26 week period 26 Dec
ended 2014
-----------------
26 Jun 27 Jun (audited)
2015 2014
Note GBPm GBPm GBPm
---- --------------------------------------------------- -------- ------- ----------
Cash flows from operating activities
Cash generated from operations before
external transaction costs and exceptional
pension contribution 9 71.0 53.3 104.4
Exceptional contribution to pension
scheme - - (1.0)
External transaction costs in respect
of acquisitions (0.6) (0.5) (1.1)
Cash generated from operations 70.4 52.8 102.3
Finance income received 0.3 0.3 0.6
Finance costs paid (5.9) (15.0) (38.0)
Transfer from restricted bank accounts
for finance costs 5.6 14.6 14.6
Payments to restricted bank accounts
for finance costs (12.8) (14.7) (5.6)
Total payments in respect of finance
costs (13.1) (15.1) (29.0)
Tax refund/ (paid) 0.8 (6.9) (6.9)
---------------------------------------------------- --- -------- ------- ----------
Net cash generated from operating
activities 58.4 31.1 67.0
---------------------------------------------------- --- -------- ------- ----------
Cash flows from investing activities
Acquisition of subsidiaries and businesses
(net of cash acquired) 11 (10.1) (5.2) (24.7)
Proceeds from sale of property, plant
and equipment 0.5 0.3 0.5
Vehicle replacement programme and improvements
to locations (5.6) (5.5) (14.1)
Branch relocations (3.1) (0.5) (1.4)
Satellite locations - - (0.1)
Development of new crematoria and
cemeteries (0.1) (1.2) (1.6)
Purchase of property, plant and equipment (8.8) (7.2) (17.2)
---------------------------------------------------- --- -------- ------- ----------
Net cash used in investing activities (18.4) (12.1) (41.4)
---------------------------------------------------- --- -------- ------- ----------
Cash flows from financing activities
Proceeds from issue of New Notes - - 94.0
Cash settlement of Old Notes - - (5.9)
External transaction costs relating
to extinguishment of Old Notes - - (5.8)
Net Proceeds from issue of New Notes - - 82.3
Issue costs in respect of borrowings
and Secured Notes (0.1) - (0.9)
Issue costs in respect of debt facility (0.1) - -
Proceeds from share issue - 0.1 0.1
Repayment of swaps - - (5.1)
Repayment of borrowings (4.0) (5.9) (11.6)
Transfer from restricted bank accounts
for repayment of borrowings 4.0 5.7 5.7
Payments to restricted bank accounts
for repayment of borrowings (4.1) (5.9) (4.0)
Total payments in respect of borrowings (4.1) (6.1) (9.9)
Dividends paid to shareholders on
Ordinary Shares 6 (6.4) (6.3) (9.8)
Redemption of B Shares in respect
of Capital Option - - (20.1)
Redemption of C Shares in respect
of Special Dividend Option - - (44.3)
Net cash used in financing activities (10.7) (12.3) (7.7)
---------------------------------------------------- --- -------- ------- ----------
Net increase in cash and cash equivalents 29.3 6.7 17.9
---------------------------------------------------- --- -------- ------- ----------
Cash and cash equivalents at the
beginning of the period 76.9 59.0 59.0
---------------------------------------------------- --- -------- ------- ----------
Cash and cash equivalents at the
end of the period 7 106.2 65.7 76.9
Restricted cash 7 16.9 20.6 9.6
Collateralisation of Liquidity Facility
(restricted) 7 - 63.2 -
---------------------------------------------------- --- -------- ------- ----------
Cash and cash equivalents at the
end of the period as
reported in the consolidated balance
sheet 7 123.1 149.5 86.5
---------------------------------------------------- --- -------- ------- ----------
Notes to the interim financial information 2015 (unaudited)
for the 26 week period ended 26 June 2015
1 Accounting policies
The principal accounting policies adopted in the preparation of
this interim condensed consolidated financial information are set
out below. These policies have been consistently applied to all
periods presented, unless otherwise stated.
Basis of preparation
The interim condensed consolidated financial information of
Dignity plc (the 'Company') is for the
26 week period ended 26 June 2015 and comprises the results,
assets and liabilities of the Company and its subsidiaries (the
'Group').
The interim condensed consolidated financial information has
been reviewed, not audited and does not constitute statutory
accounts within the meaning of s434 of the Companies Act 2006. This
interim condensed consolidated financial information has been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority and with IAS 34 'interim
financial reporting' as adopted by the European Union.
The interim condensed consolidated financial information has
been prepared in accordance with all applicable International
Financial Reporting Standards ('IFRSs'), as adopted by the European
Union, that are expected to apply to the Group's Financial Report
for the 52 week period ended 25 December 2015. This does not
include all of the information required for full annual financial
statements, and should be read in conjunction with the audited
consolidated financial statements of the Group as at and for the 52
week period ended 26 December 2014. The Directors approved this
interim condensed consolidated financial information on 29 July
2015.
The accounting policies applied by the Group in this interim
condensed consolidated financial information are the same as those
applied by the Group in its audited consolidated financial
statements as at and for the 52 week period ended 26 December 2014,
which are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The basis of
consolidation is set out in the Group's accounting policies in
those financial statements.
The Group has applied IFRS 10, Consolidated financial
statements, in preparing the interim financial information. IFRS 10
builds on existing principles by identifying the concept of control
as the determining factor on whether an entity should be included
within the consolidated financial statements of the parent company.
In order to have control, IFRS 10 requires a parent company to have
power over the investee, an exposure to variable returns because of
its involvement in the investee and the ability to use its power
over the investee to affect the amount of the variable returns. The
Group has specifically considered IFRS 10 in light of the Group's
non consolidation of its pre-arranged funeral plan trusts.
IFRS 10 consideration Analysis
Power over the investee. Power Dignity has no voting rights
arises when the investor has over the Trusts or any rights
existing rights that gives them to direct the activities of
the ability to direct the relevant the Trusts. Whilst Dignity has
activities of the investee, the power to appoint or remove
being those activities which trustees, legislation requires
influence the returns achieved the majority of trustees to
by the investee. be independent of Dignity.
Whilst Dignity controls the
charge levied to the Trusts
for the provision of funeral
services, it does not have the
power to direct the investment
The investor is exposed, or decisions of the Trusts.
has rights, to variable returns
from its involvement with the Dignity receives an allowance
investee. for the marketing of the plans
and for the performance of a
funeral. From time to time Dignity
may receive a surplus from the
Trusts.
Ultimately Dignity's return
is wholly dependent on the investment
performance of the Trusts.
The investor has the ability A majority of the Trustees are
to use its power over the investee required, by legislation, to
to affect the amount of the be independent of Dignity and
investor's returns. therefore Dignity does not,
and cannot, control the actions
of the Trustees.
The investment strategy is set,
implemented and monitored by
the Trustees. Consequently,
Dignity does not have the power
to affect the amount of its
returns.
The Group does not believe that, given the above conditions
required for consolidation in the new standard, a change in
accounting policy is required.
1 Accounting policies (continued)
The preparation of interim condensed consolidated financial
information requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, and income and
expenses. In preparing this interim condensed consolidated
financial information, the significant judgments made by the
management in applying the Group's accounting policies and key
source of estimation uncertainty were the same (except for the
judgments applied in the assessment of IFRS 10 as detailed above)
as those applied to the audited consolidated financial statements
as at and for the 52 week period ended 26 December 2014.
Comparative information has been presented as at and for the 26
week period ended 27 June 2014 and as at and for the 52 week period
ended 26 December 2014.
The comparative figures for the 52 week period ended 26 December
2014 do not constitute statutory accounts for the purposes of s434
of the Companies Act 2006. A copy of the Group's statutory accounts
for the 52 week period ended 26 December 2014 have been delivered
to the Registrar of Companies and contained an unqualified
auditors' report in accordance with s498 of the Companies Act
2006.
2 Revenue and segmental analysis
Operating segments are reported in a manner consistent with
internal reporting provided to the chief operating decision maker
who is responsible for allocating resources and assessing
performance of the operating segments. The chief operating decision
maker of the Group has been identified as the four Executive
Directors. The Group has three reporting segments, funeral
services, crematoria and pre-arranged funeral plans. The Group also
reports central overheads, which comprise unallocated central
expenses.
Funeral services relate to the provision of funerals and
ancillary items, such as memorials and floral tributes.
Crematoria services relate to cremation services and the sale of
memorials and burial plots at the Dignity operated crematoria and
cemeteries.
Pre-arranged funeral plans represent the sale of funerals in
advance to customers wishing to make their own funeral
arrangements, and the marketing and administration costs associated
with making such sales.
Substantially all Group revenue is derived from, and
substantially all of the Group's assets and liabilities are located
in, the United Kingdom and Channel Islands and relates to services
provided. Overseas transactions are not material.
Underlying profit is stated before profit or loss on sale of
fixed assets, external transaction costs and exceptional items.
Underlying operating profit is included as it is felt that
adjusting operating profit/ (loss) for these items provides a
useful indication of the Group's performance.
The revenue and operating profit/ (loss), by segment, was as
follows:
26 week period ended 26 June 2015
Underlying
operating
profit/
(loss) Underlying
before operating External Operating
depreciation Depreciation profit/ transaction profit/
Revenue and amortisation and amortisation (loss) costs (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- ------------------ ------------------ ----------- ------------- ----------
Funeral services 112.5 51.7 (5.1) 46.6 (1.5) 45.1
Crematoria 33.7 21.1 (1.6) 19.5 - 19.5
Pre-arranged funeral
plans 12.5 4.1 (0.1) 4.0 - 4.0
Central overheads - (10.1) (0.3) (10.4) - (10.4)
----------------------- -------- ------------------ ------------------ ----------- ------------- ----------
Group 158.7 66.8 (7.1) 59.7 (1.5) 58.2
Finance costs (13.4) - (13.4)
Finance income 0.2 - 0.2
----------------------- -------- ------------------ ------------------ ----------- ------------- ----------
Profit before tax 46.5 (1.5) 45.0
Taxation - continuing
activities (10.0) - (10.0)
----------------------- -------- ------------------ ------------------ ----------- ------------- ----------
Underlying earnings for
the period 36.5
Total other items (1.5)
----------------------- -------- ------------------ ------------------ ----------- ------------- ----------
Profit after taxation 35.0
----------------------- -------- ------------------ ------------------ ----------- ------------- ----------
Earnings per share for profit attributable to equity shareholders
(pence)
- Basic 74.0p 71.0p
2 Revenue and segmental analysis (continued)
26 week period ended 27 June 2014
Underlying Loss
operating on sale
profit/ of fixed
(loss) Underlying assets
before operating and external Operating
depreciation Depreciation profit/ transaction profit/
Revenue and amortisation and amortisation (loss) costs (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ----------------- ------------------ ----------- -------------- ----------
Funeral services 92.4 39.0 (4.7) 34.3 (0.4) 33.9
Crematoria 28.1 16.7 (1.5) 15.2 - 15.2
Pre-arranged
funeral plans 12.6 4.1 (0.1) 4.0 - 4.0
Central overheads - (7.6) (0.3) (7.9) (0.4) (8.3)
-------------------- ---------- ----------------- ------------------ ----------- -------------- ----------
Group 133.1 52.2 (6.6) 45.6 (0.8) 44.8
Finance costs (15.8) - (15.8)
Finance income 2.5 - 2.5
-------------------- ---------- ----------------- ------------------ ----------- -------------- ----------
Profit before tax 32.3 (0.8) 31.5
Taxation -
continuing
activities (7.3) - (7.3)
-------------------- ---------- ----------------- ------------------ ----------- -------------- ----------
Underlying earnings
for
the period 25.0
Total other items (0.8)
-------------------- ---------- ----------------- ------------------ ----------- -------------- ----------
Profit after
taxation 24.2
-------------------- ---------- ----------------- ------------------ ----------- -------------- ----------
Earnings per share for profit attributable
to equity shareholders (pence)
- Basic 46.7p 45.2p
52 week period ended 26 December
2014
Loss on
sale of
Underlying fixed
operating assets,
profit/ external
(loss) Underlying transaction
before operating costs Operating
depreciation Depreciation profit/ and exceptional profit/
Revenue and amortisation and amortisation (loss) items (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- ----------------- ----------------- ----------- ----------------- ----------
Funeral services 184.4 75.9 (9.6) 66.3 (1.5) 64.8
Crematoria 55.2 32.3 (3.2) 29.1 (0.2) 28.9
Pre-arranged
funeral
plans 29.3 7.6 (0.2) 7.4 - 7.4
Central overheads - (17.4) (0.5) (17.9) (0.3) (18.2)
------------------ -------- ----------------- ----------------- ----------- ----------------- ----------
Group 268.9 98.4 (13.5) 84.9 (2.0) 82.9
Finance costs (30.6) (124.2) (154.8)
Finance income 4.2 - 4.2
------------------ -------- ----------------- ----------------- ----------- ----------------- ----------
(Loss)/ profit
before
tax 58.5 (126.2) (67.7)
Taxation -
continuing
activities (13.1) - (13.1)
Taxation -
exceptional - 25.8 25.8
Taxation (13.1) 25.8 12.7
------------------ -------- ----------------- ----------------- ----------- ----------------- ----------
Underlying
earnings
for the period 45.4
Total other items (100.4)
------------------ -------- ----------------- ----------------- ----------- ----------------- ----------
Loss after
taxation (55.0)
------------------ -------- ----------------- ----------------- ----------- ----------------- ----------
Earnings per share for (loss)/ profit attributable
to equity shareholders (pence)
- Basic 85.8p (104.0)p
3 Net finance costs
52 week
26 week period period
ended ended
------------------------
26 Jun 27 Jun 26 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------------------- --------------- ------- --------
Finance costs
Old Notes - 13.7 21.8
New Notes 12.5 - 5.1
Amortisation of issue costs - 0.9 1.5
Crematoria Acquisition Facility 0.3 0.3 0.6
Other loans 0.5 0.7 1.3
Unwinding of discounts 0.1 0.2 0.3
-------------------------------------------- --------------- ------- --------
Underlying finance costs 13.4 15.8 30.6
Extinguishment of Old Notes - exceptional - - 123.2
Elimination of swap - exceptional - - 1.0
-------------------------------------------- --------------- ------- --------
Finance costs 13.4 15.8 154.8
-------------------------------------------- --------------- ------- --------
Finance income
Bank deposits (0.2) (0.5) (1.0)
Amortisation of premium on Old Notes - (2.0) (3.2)
-------------------------------------------- --------------- ------- --------
Finance income (0.2) (2.5) (4.2)
-------------------------------------------- --------------- ------- --------
Net finance costs 13.2 13.3 150.6
4 Taxation
The taxation charge on continuing operations in the period is
based on a full year estimated effective tax rate, before
exceptional items, of 21.5 per cent (2014: 22.5 per cent) on profit
before tax for the 26 week period ended 26 June 2015.
52 week
26 week period period
ended ended
------------------------
26 Jun 27 Jun 26 Dec
2015 2014 2014
GBPm GBPm GBPm
---------- --------------- ------- --------
Taxation 10.0 7.3 (12.7)
----------- --------------- ------- --------
The main rate of Corporation Tax in the UK changed from 21 per
cent to 20 per cent from 1 April 2015. Further rate changes are
anticipated, if these are subsequently enacted in the form expected
then the corporation tax rate will reduce by 1 per cent in 2017 and
then by a further 1 per cent in 2020. The changes had not been
substantively enacted at the balance sheet date and therefore are
not recognised in these financial statements.
Each percentage point reduction in Corporation Tax rate is
expected to reduce the deferred tax liability by approximately
GBP0.8 million. These impacts will be recognised in the period in
which substantive enactment occurs.
5 Earnings per share (EPS)
The calculation of basic earnings per Ordinary Share has been
based on the profit attributable to equity share holders for the
relevant period.
For diluted earnings per Ordinary Share, the weighted average
number of Ordinary Shares in issue is adjusted to assume conversion
of any dilutive potential Ordinary Shares.
The Group has two classes of potentially dilutive Ordinary
Shares being those share options granted to employees under the
Group's SAYE Scheme and the contingently issuable shares under the
Group's LTIP Schemes. At the balance sheet date, the performance
criteria for the vesting of the awards under the LTIP Schemes are
assessed, as required by IAS 33, and to the extent that the
performance criteria have been met those contingently issuable
shares are included within the diluted EPS calculations. In
December 2014, the potential issue of new shares pursuant to the
Group's share option plans had no impact on the calculation of
earnings per share.
The Board believes that profit on ordinary activities before
profit (or loss) on sale of fixed assets, external transaction
costs, exceptional items and after taxation is a useful indication
of the Group's performance, as it excludes significant
non-recurring items. This reporting measure is defined as
'Underlying profit after taxation'.
Accordingly, the Board believes that earnings per share
calculated by reference to this underlying profit after taxation is
also a useful indicator of financial performance.
Reconciliations of the earnings and the weighted average number
of shares used in the calculations are set out below:
Weighted
average
number Per share
Earnings of shares amount
GBPm millions pence
----------------------------------------------- --------- ----------- ----------
26 week period ended 26 June 2015
Underlying profit after taxation and EPS 36.5 49.3 74.0
Add: External transaction costs (net of
taxation of GBPnil million) (1.5)
----------------------------------------------- --------- ----------- ----------
Profit attributable to shareholders -
Basic EPS 35.0 49.3 71.0
----------------------------------------------- --------- ----------- ----------
Profit attributable to shareholders -
Diluted EPS 35.0 49.4 70.9
----------------------------------------------- --------- ----------- ----------
26 week period ended 27 June 2014
Underlying profit after taxation and EPS 25.0 53.5 46.7
Add: Loss on sale of fixed assets and
external transaction costs
(net of taxation of GBPnil million) (0.8)
----------------------------------------------- --------- ----------- ----------
Profit attributable to shareholders -
Basic EPS 24.2 53.5 45.2
----------------------------------------------- --------- ----------- ----------
Profit attributable to shareholders -
Diluted EPS 24.2 53.7 45.1
----------------------------------------------- --------- ----------- ----------
52 week period ended 26 December 2014
Underlying profit after taxation and EPS 45.4 52.9 85.8
Add: Exceptional items, loss on sale of
fixed assets and
external transaction costs (net of taxation
of GBP25.8 million) (100.4)
----------------------------------------------- --------- ----------- ----------
Loss attributable to shareholders - Basic
and diluted EPS (55.0) 52.9 (104.0)
----------------------------------------------- --------- ----------- ----------
6 Dividends
On 26 June 2015, the Group paid a final dividend, in respect of
2014, of 13.01 pence per share (2014: 11.83 pence per share)
totalling GBP6.4 million (2014: GBP6.3 million).
On 29 July 2015, the Directors declared an interim dividend, in
respect of 2015, of 7.14 pence per share (2014: 6.49 pence per
share) totalling GBP3.5 million (2014: GBP3.5 million), which will
be paid on 30 October 2015 to those shareholders on the register at
the close of business on 25 September 2015.
7 Cash and cash equivalents
26 Jun 27 Jun 26 Dec
2015 2014 2014
Note GBPm GBPm GBPm
------------------------------------------------ ------ ------- -------- -------
Operating cash as reported in the consolidated
statement of
cash flows as cash and cash equivalents 106.2 65.7 76.9
Amounts set aside for debt service payments (a) 16.9 20.6 9.6
Collateralisation of Liquidity Facility (b) - 63.2 -
------------------------------------------------ ------ ------- -------- -------
Cash and cash equivalents as reported
in the balance sheet 123.1 149.5 86.5
-------------------------------------------------------- ------- -------- -------
(a) This amount was transferred to restricted bank accounts
which could only be used for the payment of the interest and
principal on the Secured Notes, the repayment of liabilities due on
the Group's interest rate swaps and commitment fees due on its
undrawn borrowing facilities and for no other purpose.
Consequently, this amount does not meet the definition of cash and
cash equivalents in IAS 7, Statement of Cash Flows. In June 2015
this amount was used to pay these respective parties on 30 June
2015 and in December 2014 this amount was used to pay these
respective parties on 31 December 2014. Of this amount GBP12.8
million (December 2014: GBP5.6 million) is shown within the
Statement of Cash Flows as 'Payments to restricted bank accounts
for finance costs' and GBP4.1 million (December 2014: GBP4.0
million) is shown within 'Financing activities' as 'Payments to
restricted bank accounts for repayment of borrowings'.
(b) As described in the 2014 Annual Report, this amount
represents the cash collateralisation of the Liquidity Facility
which does not meet the definition of cash and cash equivalents in
IAS 7.
8 Net debt
26 Jun 27 Jun 26 Dec
2015 2014 2014
GBPm GBPm GBPm
--------------------------------------------- -------- -------- --------
Net amounts owing on Old Notes - (396.3) -
Net amounts owing on New Notes (590.6) - (594.6)
Add: unamortised issue costs - issued 2014 (0.7) (15.4) (0.7)
--------------------------------------------- -------- -------- --------
Gross amounts owing on Secured Notes per
financial statements (591.3) (411.7) (595.3)
Net amounts owing on Crematoria Acquisition
Facility
per financial statements (15.6) (15.6) (15.6)
Add: unamortised issue costs on Crematoria
Acquisition Facility (0.2) (0.2) (0.2)
--------------------------------------------- -------- -------- --------
Gross amounts owing (607.1) (427.5) (611.1)
--------------------------------------------- -------- -------- --------
Accrued interest on Secured Notes (12.9) (14.4) (5.7)
Cash and cash equivalents(1) 123.1 86.3 86.5
--------------------------------------------- -------- -------- --------
Net debt (496.9) (355.6) (530.3)
--------------------------------------------- -------- -------- --------
(1) In June 2014, cash held as collateral for the Liquidity
Facility was excluded as it did not meet the definition of cash and
cash equivalents in IAS7.
In addition to the above, the consolidated balance sheet also
includes finance lease obligations and other financial liabilities
which totalled GBP0.7 million (June 2014: GBP5.0 million; December
2014: GBP0.7 million). These amounts do not represent sources of
funding for the Group and are therefore excluded from the
calculation of net debt.
The Group's primary financial covenant in respect of the New
Notes requires EBITDA to total debt service ('EBITDA DSCR') to be
at least 1.5 times. At 26 June 2015, the actual ratio was 4.37
times (December 2014: 10.69 times). The New Notes were issued on 17
October 2014. Consequently, Senior Interest only accrues from this
date for the Relevant Period. Debt Service, assuming a full year
Senior Interest would have been approximately GBP33.7 million. On
this basis, the EBITDA DSCR would have been 3.38 times (December
2014: 2.95 times) and the Free Cashflow to total debt service would
have been 3.11 times (December 2014: 2.47 times). June 2014
comparatives are not provided as the New Notes were not tested at
that time.
These ratios are calculated for EBITDA and total debt service on
a 12 month rolling basis and reported quarterly. In addition, both
terms are specifically defined in the legal agreement relating to
the Secured Notes. As such, they cannot be accurately calculated
from the contents of this Report.
9 Reconciliation of cash generated from operations
52 week
26 week period period
ended ended
-----------------
26 Jun 27 Jun 26 Dec
2015 2014 2014
GBPm GBPm GBPm
--------------------------------------------- -------- ------- --------
Net profit/ (loss) for the period 35.0 24.2 (55.0)
Adjustments for:
Taxation 10.0 7.3 (12.7)
Net finance costs 13.2 13.3 26.4
Loss on disposal of fixed assets - 0.1 0.3
Depreciation charges 7.0 6.5 13.3
Amortisation of intangibles 0.1 0.1 0.2
Movement in inventories 0.3 - 0.2
Movement in trade receivables (1.6) 1.2 0.3
Movement in trade payables 0.9 (0.8) (0.6)
External transaction costs 1.5 0.7 1.7
Loss on extinguishment of Old Notes
- exceptional - - 123.2
Elimination of swap - exceptional - - 1.0
Difference in pension charge and cash
contribution 0.1 (0.2) -
Changes in other working capital (excluding
acquisitions) 3.5 0.1 4.1
Employee share option charges 1.0 0.8 2.0
--------------------------------------------- -------- ------- --------
Cash generated from operations before
external transaction costs
and exceptional pension contributions 71.0 53.3 104.4
--------------------------------------------- -------- ------- --------
10 Financial risk management and financial instruments
(a) Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, interest rate risk and
other price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's annual financial statements as at 26 December
2014. There have been no changes in the approach to risk management
or in any risk management policies since the year end.
(b) Liquidity risk
Compared to year end, there was no material change in the
contractual undiscounted cash out flows for financial
liabilities.
(c) Fair value estimation
All financial assets and liabilities are carried at amortised
cost. The fair value and book value of the borrowings, which are
level 1 (other than in respect of the Crematoria Acquisition
Facility which is level 2), are set out below. With the exception
of long-term and short-term borrowings (excluding finance lease
obligations) the fair value and the book value are the same.
26 Jun 2015 26 Dec 2014
GBPm GBPm
------------------------------------------------------------ ------------ ------------
Long-term borrowings (excluding finance lease obligations) 621.4 649.6
------------------------------------------------------------ ------------ ------------
Long-term borrowings (excluding finance lease obligations) has a
book value of GBP598.0 million (December 2014: GBP602.2 million)
and short-term borrowings (excluding finance lease obligations) has
a book value of GBP8.1 million (December 2014: GBP8.0 million).
11 Acquisitions and disposals
(a) Acquisition of subsidiary and other businesses
Provisional
fair value
GBPm
Property, plant and equipment 1.2
Intangible assets: trade names 4.9
Cash acquired 1.0
Receivables 0.2
Provisions (0.1)
Deferred taxation (0.7)
Net assets acquired 6.5
Goodwill arising 2.7
9.2
Satisfied by:
Cash paid on completion 8.4
Accrued consideration 0.8
Total consideration 9.2
During 2015, the Group acquired the operational interest of 10
funeral locations.
All assets and liabilities are recorded at their provisional
fair values. The residual excess of the consideration paid over the
net assets acquired is recognised as goodwill, of which GBP0.8
million is tax deductible. This goodwill represents future benefits
to the Group in terms of revenue, market share and delivering the
Group's strategy.
The fair value adjustments contain provisional amounts, which
will be finalised in the 2015 full year results. These adjustments
reflect the recognition of trade names and associated deferred
taxation, and adjustments to reflect the fair value of other
working capital movements such as receivables, inventories and
accruals which are immaterial.
All acquisitions have been accounted for under the acquisition
method. None were individually material and consequently have been
aggregated. The aggregated impact of the acquisitions on the Income
Statement for the period is not material.
(b) Reconciliation to cash flow statement
GBPm
Cash paid on completion 8.4
Cash paid in respect of prior year acquisitions 2.7
Cash acquired on acquisition (1.0)
Acquisition of subsidiaries and businesses as reported
in the Cash flow statement 10.1
(c) Acquisition and disposals of property, plant and
equipment
In addition to the above, there were additions in relation to
crematoria developments totalling GBP0.1 million (June 2014: GBP1.2
million; December 2014: GBP1.6 million) and GBP8.7 million (June
2014: GBP6.0 million; December 2014: GBP15.6 million) of other
additions to property, plant and equipment in the period. The Group
also received proceeds of GBP0.5 million (June 2014: GBP0.3
million; December 2014: GBP0.5 million) from disposals of property,
plant and equipment, which had a net book value of GBP0.5 million
(June 2014: GBP0.4 million; December 2014: GBP0.7 million).
The Group had capital expenditure authorised by the Board and
contracted for at the balance sheet date of GBP13.7 million (June
2014: GBP10.0 million; December 2014: GBP2.0 million) in respect of
property, plant and equipment.
12 Pre-arranged funeral plan trust
During the period, the Group entered into transactions with the
Trusts associated with the pre-arranged funeral plan businesses.
The nature of the relationship with the Trusts is set out in the
accounting policies, which can be found in the Group's 2014 Annual
Report. Amounts may only be paid out of the Trusts in accordance
with the relevant Trust Deeds.
Transactions principally comprise:
-- The recovery of marketing and administration allowances in
relation to plans sold net of cancellations; and
-- Receipts from the Trusts in respect funerals provided.
Transactions also include:
-- Receipts from the Trusts in respect of cancellations by
existing members;
-- Reimbursement by the Trusts of expenses paid by the Group on
behalf of the respective Trusts; and
-- The payment of realised surpluses generated by the Trust
funds as and when the trustees sanction such payments.
Transactions are summarised below:
Amounts due to
the Group within
Transactions during one year at the
the period period end
----------------------------- -----------------------------
52 week 52 week
period period
26 week period ended 26 week period ended
ended ended
------------------- -------------------
26 Jun 27 Jun 26 Dec 26 Jun 27 Jun 26 Dec
2015 2014 2014 2015 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- -------- -------- --------- -------- --------
Dignity Limited Trust Fund 0.2 0.2 0.3 - - -
National Funeral Trust 20.9 16.7 34.8 2.0 1.6 2.4
Trust for Age UK Funeral
Plans 19.9 16.8 35.1 1.7 1.8 2.8
Peace of Mind Trusts 1.1 0.6 1.5 - 0.2 0.3
---------------------------- --------- -------- -------- --------- -------- --------
A further GBP3.2 million (June 2014: GBP3.0 million; December
2014: GBP3.7 million) is due after more than one year.
13 Post balance sheet events
On 13 July 2015, the Group completed the acquisition of 36
funeral locations from Laurel Funerals for consideration of GBP38
million. The Group has not, at the point of authorisation for issue
of this interim report, completed its assessment of the fair values
of assets and liabilities acquired and the intangible assets
arising in respect of this acquisition and therefore no further
disclosure is provided.
There were no other significant post balance sheet events.
14 Interim Report
Copies of this Interim Report are available at the Group's
website www.dignityfuneralsplc.co.uk.
15 Securitisation
In accordance with the terms of the securitisation carried out
in April 2003, Dignity (2002) Limited (the holding company of those
companies subject to the securitisation) has today issued reports
to the Rating Agencies (Fitch Ratings and Standard & Poor's),
the Security Trustee and the holders of the notes issued in
connection with the securitisation confirming compliance with the
covenants established under the securitisation.
16 Seasonality
The Group's financial results and cash flows have historically
been subject to seasonal trends between the first half and second
half of the financial year. Traditionally, the first half of the
financial year sees slightly higher revenue and profitability.
There is no assurance that this trend will continue in the
future.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that:
(a) The interim condensed consolidated financial information has
been prepared in accordance with IAS 34 as adopted by the European
Union; and
(b) The Interim Report includes a fair review of the information as required by:
-- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
half of 2015 and their impact on the interim condensed consolidated
financial information; and a description of the principal risks and
uncertainties for the remaining second half of the year; and
-- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first half
of 2015 and any material changes in the related party transactions
described in the last annual report.
The Directors of Dignity plc and their functions are listed
below:
Peter Hindley - Non-Executive Chairman
Mike McCollum - Chief Executive
Steve Whittern - Finance Director
Andrew Davies - Operations Director
Richard Portman - Corporate Services Director
Alan McWalter - Senior Independent Director
Ishbel Macpherson - Non-Executive Director
Jane Ashcroft - Non-Executive Director
Martin Pexton - Non-Executive Director
By order of the Board
Steve Whittern
Finance Director
29 July 2015
Independent review report to Dignity plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the Interim Report for the 26 week
period ended 26 June 2015 which comprises the consolidated income
statement, the consolidated statement of comprehensive income, the
consolidated balance sheet, the consolidated statement of changes
in equity, the consolidated statement of cash flows and notes 1 to
16. We have read the other information contained in the Interim
Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The Interim Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the Interim Report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this Interim Report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Interim Report
based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Interim Report for 26 week period ended 26 June 2015 is not
prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Birmingham
29 July 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DBGDRCBDBGUI
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