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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Dignity Plc | LSE:DTY | London | Ordinary Share | GB00BRB37M78 | ORD 12 48/143P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 549.00 | 551.00 | 570.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMDTY
RNS Number : 3175F
Dignity PLC
27 July 2016
For immediate release 27 July 2016
Dignity plc
Interim results for the 26 week period ended 24 June 2016
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 24 June 2016.
Hot Features
Premium
26 week 26 week
period period
ended ended increase/
24 26 June (decrease)
June 2015 per cent
2016
----------------------------------- -------- --------- -------------
Revenue (GBPmillion) 158.0 158.7 (0.4)
Underlying operating profit(a)
(GBPmillion) 55.6 59.7 (6.9)
Underlying profit before tax(a)
(GBPmillion) 42.4 46.5 (8.8)
Underlying earnings per share(b)
(pence) 67.7 74.0 (8.5)
Cash generated from operations(c)
(GBPmillion) 64.6 71.0 (9.0)
Operating profit (GBPmillion) 54.7 58.2 (6.0)
Profit before tax (GBPmillion) 41.5 45.0 (7.8)
Basic earnings per share (pence) 65.9 71.0 (7.2)
Number of deaths 302,000 317,000 (4.7)
Interim dividend (pence) 7.85 7.14 10.0
------------------------------------- -------- --------- -------------
(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. See note 2.
(c) Cash generated from operations excludes external transaction costs.
The results for the first half of 2016 were slightly ahead of the Board's expectations. Underlying operating profits in the second quarter of 2016 are GBP0.6 million higher than the same period in 2015. Its full year expectations remain unchanged.
Compared to long term trends, the number of deaths in 2015 was abnormally high, helping the Group deliver an exceptional result in 2015. The Group continues to expect this unprecedented increase in deaths to reverse in 2016. Its current assumption remains that the number of deaths in 2016 will be broadly comparable to 2014.
Although as expected underlying operating performance in the first half of the year was lower than in 2015, underlying operating profit was approximately 22 per cent higher than the same period in 2014 (when the Group reported GBP45.6 million) and underlying earnings per share was approximately 45 per cent higher (when the Group reported 46.7 pence).
The Group's expectations for the year remain unchanged. Although this would mean reported underlying operating profit in 2016 slightly below the prior year, the Group remains committed to its target of increasing earnings per share by an average of 10 per cent per year over the medium-term.
The Group has acquired six funeral locations for an aggregate investment of GBP5.4 million and has opened five satellite locations in the period to 24 June 2016. Since this date, the Group has acquired one funeral location and opened three satellite locations. In addition and as previously announced on 28 June 2016, the Group completed the acquisition of three freehold crematoria from Funeral Services Limited (trading as Co-op Funeralcare) as part of an agreement to acquire five locations from them for consideration of GBP43 million. On 22 July 2016, the Group completed the acquisition of one of the two leasehold crematoria from Funeral Services Limited.
Mike McCollum, Chief Executive of Dignity plc commented:
"The Group has performed well in the first half of 2016 and traded slightly ahead of our expectations. The Group's expectations for the full year remain unchanged."
For more information
Mike McCollum, Chief Executive Steve Whittern, Finance Director Dignity plc +44 (0) 207 466 5000 Richard Oldworth Sophie McNulty Catriona Flint Buchanan +44 (0) 207 466 5000 www.buchanan.uk.com
Chairman's statement
Results
As anticipated, the first half of 2016 witnessed a significant reduction in the number of deaths at 302,000, 4.7 per cent lower than the same period in 2015. This was the principal cause of the Group's underlying operating profits being 6.9 per cent lower at GBP55.6 million (2015: GBP59.7 million).
Underlying earnings per share decreased 8.5 per cent to 67.7 pence per share (2015: 74.0 pence per share), reflecting the impact of a fixed finance charge on reduced operating profits.
Basic earnings per share were 65.9 pence per share (2015: 71.0 pence per share), a decrease of 7.2 per cent.
Update on crematoria acquisition from Funeral Services Limited (trading as Co-op Funeralcare)
I was delighted that we were able to announce the proposed acquisition of five crematoria from Funeral Services Limited (trading as Co-op Funeralcare) for GBP43 million on 31 May 2016. The three freehold locations being acquired completed on 27 June 2016 (after the balance sheet date). The leasehold location in Shropshire was acquired on 22 July 2016. The remaining leasehold location is progressing towards completion, with consent being required from the relevant local authority. It is now expected to complete during September 2016.
Dividends
The Group paid a final dividend of 14.31 pence per Ordinary Share on 24 June 2016.
The Group proposes to pay an interim dividend of 7.85 pence per Ordinary Share (2015: 7.14 pence) on 28 October 2016 to shareholders on the register at 23 September 2016. This is a 10 per cent increase on the previous year.
Our staff
Our customer survey results continue to demonstrate the outstanding work being done by our staff. In all parts of our business, they remain focused on performing their roles to the best of their ability, allowing the Group to help so many families at a difficult time.
Outlook
The Group continues to expect that the high number of deaths seen in 2015 will normalise in 2016. Although, as expected, this would lead to a slight reduction in operating profit during the year, the Group remains committed to its medium-term target of increasing its earnings per share by an average of 10 per cent per annum.
Peter Hindley
Chairman
27 July 2016
Business and Financial Review
Introduction
The Group's operations are managed across three distinct divisions: funerals, crematoria and pre-arranged funeral plans. 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 Group's crematoria and cemeteries. Pre-arranged funeral plans represent the sale of funerals to customers wishing to make their own funeral arrangements in advance.
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 2016 were 302,000 (2015: 317,000), a decrease of 4.7 per cent. The Group's operating results should therefore be considered in that context.
Funeral services
At 24 June 2016, the Group operated a network of 777 (June 2015: 729; December 2015: 767) funeral locations throughout the UK generally trading under established local trading names. The change to the portfolio reflects the acquisition of six additional funeral locations, five new satellite locations and one closure.
In the first half of 2016, the Group conducted 36,700 funerals (2015: 39,500) in the United Kingdom; a reduction of seven per cent. Approximately one and a half per cent of these funerals were performed in Northern Ireland (2015: two per cent). Excluding Northern Ireland, these funerals represented approximately 12.0 per cent (June 2015: 12.3 per cent; December 2015: 12.3 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. That said, the market share reduction since the end of 2015 was slightly more than the Board expected but followed market share for 2015 being recorded at a slightly higher level than anticipated by the Board.
Underlying operating profit was GBP44.1 million (2015: GBP46.6 million), 5.4 per cent lower than the same period in 2015. This is a direct consequence of the number of funerals performed. Average incomes have increased in line with the Board's expectations and costs continue to be well controlled. Some investment is being made to ensure the division has sufficient staffing to support the network following its expansion over the last two to three years.
Crematoria
The Group operated 39 crematoria (June 2015: 39; December 2015: 39) and is the largest single operator of crematoria in Great Britain. The Group performed 28,900 cremations (2015: 31,500) in the period.
These volumes represent approximately 9.6 per cent (June 2015: 9.9 per cent; December 2015: 9.8 per cent) of total estimated deaths in Great Britain.
Underlying operating profit was GBP18.3 million (2015: GBP19.5 million), a decrease of 6.2 per cent. This operating performance is broadly consistent with the reduction in cremation volumes. Sales of memorials and other items equated to GBP270 per cremation (2015: GBP261 per cremation).
Pre-arranged funeral plans
Active pre-arranged funeral plans were approximately 384,000 at the end of the period (June 2015: 354,000; December 2015: 374,000). 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 trust 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 rec 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 GBP10.8 million in the period (2015: GBP10.4 million). This includes an accrual of GBP1.6 million (June 2015: GBP2.8 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, save for the changes approved by shareholders to Directors' remuneration at the annual general meeting on 9 June 2016. The decrease in the accrual reflects the relative performance in the current period compared to the prior period.
Investment continues to ensure the Group's central functions can appropriately support the continuing growth of the network of locations operated by the Group.
The Group remains on target and on budget to go live with its upgraded accounting software at the end of 2016 at a capital cost of approximately GBP3 million.
Corporate development activity
The Group has invested GBP5.4 million in acquiring six established funeral locations during the period and has also invested GBP0.4 million on satellite locations. The satellite locations mirror the 81 locations opened up to 2015 which have shown themselves as a project to be successful generating pre tax operating profits of approximately GBP1.2 million on the GBP4.1 million of capital invested. These locations are selected to be close enough to existing business centres to use their specialist vehicles and mortuary equipment. In this way, the locations provide the same outstanding levels of client service without the need for significant capital investments. The Group anticipates approximately 10 to 15 satellite locations in total being opened in 2016 and approximately 15 to 20 per annum thereafter.
The Group is also actively working to finalise construction plans on the two crematoria locations for which it has planning permission. These locations are expected to open in late 2017/ 2018. Capital expenditure of approximately GBP7 million is committed in respect of these projects. Two other planning applications remain under appeal, with decisions expected in 2017.
Earnings per share
As a consequence of the reduction in operating profits, underlying earnings per share decreased 8.5 per cent to 67.7 pence per Ordinary Share.
Cash flow and cash balances
The Group continues to be strongly cash generative. Cash generated from operations, before external transaction costs, was GBP64.6 million (2015: GBP71.0 million), reflecting operating performance.
In addition to the corporate development activity in the period, the Group spent GBP7.1 million (2015: GBP8.8 million) on purchases of property, plant and equipment.
This is analysed as:
24 June 26 June
2016 2015
GBPm GBPm
------------------------------------------------ -------- --------
Vehicle replacement programme and improvements
to locations 5.9 5.6
Branch relocations 0.8 3.1
Satellite locations (completed and in 0.4 -
progress)
Development of new crematoria and cemeteries - 0.1
Total property, plant and equipment 7.1 8.8
Partly funded by:
Disposal proceeds (0.5) (0.5)
------------------------------------------------- -------- --------
Net capital expenditure 6.6 8.3
------------------------------------------------- -------- --------
Capital expenditure in the period to June 2015 on branch relocations included the purchase of the freehold interest of one of the Group's main service centres in London. This secured 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 GBP120.7 million. This included GBP16.9 million set aside for the debt service payments made on 30 June 2016.
This significant cash balance will be used to fund the acquisition of the five crematoria from Funeral Services Limited for GBP43 million, whilst leaving the Group the ability to fund other corporate development opportunities and meet its expected dividend and tax liabilities for the next 12 months.
Other working capital movements in the period reflect the payment of larger bonuses to the Group's employees compared to the previous period, as described more fully in the Group's 2015 Annual Report.
Pensions
As a result of the significant reduction in AA rated bond yields, which was to some extent offset by good investment returns, the Group's pension scheme deficit has increased to GBP15.0 million (June 2015: GBP9.0 million; December 2015: GBP12.5 million).
Taxation
The Group's effective tax rate for 2016 is expected to be 21.0 per cent before exceptional items. The effective rate for 2017 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
Drawn facilities
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 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 (which is applicable to the securitised subgroup of Dignity) requires EBITDA to total debt service to be above 1.5 times. The ratio at 24 June 2016 was 3.19 times (June 2015: 4.37 times; December 2015: 3.35 times). Further details may be found in note 8. The reported ratio for June 2015 does not include a full year's debt service within the calculation, as the New Notes were issued in October 2014. If the debt service was annualised, the June 2015 ratio would have been 3.38 times.
As described in the Group's 2015 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.
As set out in note 8, the Group's gross amounts owing on its debt obligations were GBP598.9 million (June 2015: GBP607.1 million; December 2015: GBP603.0 million). Net debt was GBP490.9 million (June 2015: GBP496.9 million; December 2015: GBP517.1 million).
The balance sheet includes GBP583.1 million of gross amounts owing on all Secured Notes. At the balance sheet date, the market value of the Secured Notes was GBP652.9 million.
Undrawn committed facilities
The Group has a GBP26.25 million debt facility with the Royal Bank of Scotland. 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 for any purpose. Any element of the facility not drawn by the end of 2016 will be cancelled. The facility is repayable in June 2019. 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.
Post balance sheet events
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 21 July 2016. 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 2016
24 June 2016
Total estimated This is as reported 302,000 The number of deaths
number of deaths by the Office for (H1 2015: 317,000) in 2015 was abnormally
in Britain (number) National Statistics. (a) high and the Group
(FY 2015: 588,000)(b) expects this to
normalise in 2016.
Funeral market This is the number 12.0% Market share is
share excluding of funerals performed slightly lower
Northern Ireland by the Group in than anticipated,
(per cent) Britain divided although 2015 market
by the total estimated share was slightly
number of deaths higher than anticipated.
in Britain.
(H1 2015: 12.3%)(a)
(FY 2015: 12.3%)(b)
Number of funerals This is the number 36,700 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 2015: 39,500)(a)
(FY 2015: 73,500)(b)
Crematoria market This is the number 9.6% 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 2015: 9.9%)(a)
(FY 2015: 9.8%)(b)
Number of cremations This is the number 28,900 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 2015: 31,500)(a)
(FY 2015: 57,700)(b)
Active pre-arranged This is the number 384,000 This increase reflects
funeral plans of pre-arranged (H1 2015: 354,000)(a) continued sales
(number) funeral plans where (FY 2015: 374,000)(b) activity offset
the Group has an by the crystallisation
obligation to provide of plans sold in
a funeral in the previous periods.
future.
Underlying earnings This is underlying 67.7 pence This follows the
per share (pence) profit after tax (H1 2015: 74.0 operating performance
divided by the weighted pence)(a) in the period combined
average number of (FY 2015: 114.8 with the effect
Ordinary Shares pence)(b) of a fixed finance
in issue in the charge.
period.
Underlying operating This is the statutory GBP55.6 million The number of funerals
profit (GBP operating profit (H1 2015: GBP59.7 and cremations
million) of the Group excluding million)(a) performed is a
profit on sale of (FY 2015: GBP98.7 key driver of this
fixed assets and million)(b) operating performance.
external transaction
costs.
Cash generated This is the statutory GBP64.6 million The Group continues
from operations cash generated from (H1 2015: GBP71.0 to convert operating
(GBP million) operations excluding million)(a) profit into cash
external transaction (FY 2015: GBP125.2 efficiently, with
costs and exceptional million)(b) the number of funerals
pension contributions. and cremations
being a key driver
for the cash generated.
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 the following page.
(a) H1 2015 relates to the 26 weeks ended 26 June 2015. (b) FY 2015 relates to the 52 weeks ended 25 December 2015.
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 percentages below report the responses for the one year up to the relevant balance sheet date.
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
99.0% (December 2015: 99.2%)
99.0 per cent of respondents said that we met or exceeded their expectations.
98.0% (December 2015: 98.0%)
98.0 per cent of respondents would recommend us.
Quality of service and care
99.9% (December 2015: 99.9%)
99.9 per cent thought our staff were respectful.
99.7% (December 2015: 99.7%)
99.7 per cent thought our staff listened to their needs and wishes.
99.2% (December 2015: 99.3%)
99.2 per cent agreed that our staff were compassionate and caring.
High standards of facilities and fleet
99.8% (December 2015: 99.8%)
99.8 per cent thought our premises were clean and tidy.
99.8% (December 2015: 99.8%)
99.8 per cent thought our vehicles were clean and comfortable.
In the detail
99.3% (December 2015: 99.3%)
99.3 per cent of clients agreed that our staff had fully explained what would happen before and during the funeral.
99.2% (December 2015: 99.1%)
99.2 per cent said that the funeral service took place on time.
98.6% (December 2015: 98.6%)
98.6 per cent said that the final invoice matched the estimate provided.
Mike McCollum
Chief Executive
27 July 2016
Principal risks and uncertainties
Our principal Group risks
Outlined here is our assessment of the principal risks facing the Group. In assessing which risks should be classified as principal, we assess the probability of the risk materialising and the financial or strategic impact of the risk.
Our approach to risk management
The Group has a well established governance structure with internal control and risk management systems. The risk management process:
-- Provides a framework to identify, assess and manage risks, both positive and negative, to the Groups overall strategy and the contribution of its individual operations.
-- Allows the Board to fulfil its governance responsibilities by making a balanced and understandable assessment of the operation of the risk management process and inputs.
Responsibilities and actions
The Board
The Board is responsible for monitoring the Group's risks and their mitigants.
Risk process
The Group has a formal and ongoing process of identifying, evaluating and managing the significant risks faced by the Group. Every six months the Audit Committee formally considers the risk register and approves it for adoption by the Board.
Risk assessment
Executive Directors and senior management are responsible for identifying and assessing business risks.
Identify
Risks are identified through discussion with senior management and incorporated in the risk register as appropriate.
Assess
The potential impact and likelihood of occurrence of each risk is considered.
Mitigating activities
Mitigants are identified against each risk where possible.
Review and internal audit
The link between each risk and the Group's policies and procedures is identified. Where relevant, appropriate work is performed by the Group's internal audit function to assist in ensuring the related procedures and policies are appropriately understood and operated where they serve to mitigate risks.
Operational risk management
Risk and impact Mitigating activities 2016 commentary Change
------------------------------------- ---------------------------- ------------------------ ---------------
Significant reduction in The profile of deaths The number of No significant
the death rate has historically followed deaths is as change
There is a risk that the a similar profile expected significantly
number of deaths in any year to that predicted lower than the
significantly reduces. This by the ONS, giving same period in
would have a direct result the Group the ability 2015.
on the financial performance to plan its business
of both the funeral and crematoria accordingly.
divisions.
------------------------------------- ---------------------------- ------------------------ ---------------
Nationwide adverse publicity This risk is addressed There have been No significant
Nationwide adverse publicity by ensuring appropriate no such events change
for Dignity could result policies and procedures in the period.
in a significant reduction are in place, which
in the number of funerals are designed to ensure
or cremations performed in excellent client service
any financial period. For and careful selection
pre-arranged funeral plans, of reputable partners.
adverse publicity for the
Group or one of its partners
could result in a reduction
in the number of plans sold
or an increase in the number
of plans cancelled. This
would have a direct and significant
impact on the financial performance
of that division and the
Group as a whole.
------------------------------------- ---------------------------- ------------------------ ---------------
Ability to increase average The Group believes Average revenues No significant
revenues per funeral or cremation that its focus on increased in change
Operating profit growth is excellent client service line with the
in part attributable to increases helps to mitigate Board's expectations.
in the average revenue per this risk.
funeral or cremation. There
can be no guarantee that
future average revenues per
funeral or cremation will
be maintained or increased.
------------------------------------- ---------------------------- ------------------------ ---------------
Significant reduction in The Group believes Market share No significant
market share that this risk is was slightly change
It is possible that other mitigated for funeral lower than the
external factors, such as operations by reputation Board's expectations.
new competitors, could result and recommendation However, this
in a significant reduction being a key driver offsets 2015,
in market share within funeral to the choice of funeral where the closing
or crematoria operations. director being used. position was
This would have a direct For crematoria operations slightly higher
result on the financial performance this is mitigated than expected.
of those divisions. by difficulties associated
with building new
crematoria.
------------------------------------- ---------------------------- ------------------------ ---------------
Risk and impact Mitigating activities 2016 commentary Change
-------------------------------------- ---------------------------- -------------------------- ---------------
Demographic shifts in population In such situations, There have been No significant
There can be no assurance Dignity would seek no material changes, change
that demographic shifts in to follow the population with satellites
population will not lead shift. being opened and
to a reduced demand for funeral businesses acquired
services in areas where Dignity in appropriate
operates. areas.
-------------------------------------- ---------------------------- -------------------------- ---------------
Competition There are barriers No major changes No significant
The UK funeral services market to entry in the funeral noted. Denials change
and crematoria market is services market due of planning applications
currently very fragmented. to the importance for crematoria
of established local demonstrate the
There can be no assurance reputation and in barriers to entry.
that there will not be further the crematoria market
consolidation in the industry due to the need to
or that increased competition obtain planning approval
in the industry, whether for new crematoria
in the form of intensified and the cost of developing
price competition, service new crematoria.
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 in its profitability. There are a number
of potential affinity
The retention of affinity partners who could
partners who sell the Group's replace existing
pre-arranged funeral plans ones or add to existing
is essential to the long-term relationships. Evidence
development of the pre-arranged suggests that such
funeral plan division. The partnerships can
loss of an affinity partner be and are being
could lead to a reduction developed.
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 significant
There can be no assurance specific exemptions changes noted change
that changes will not be under European legislation in the period.
made to UK taxes, such as for the UK on the
VAT. VAT is not currently VAT treatment of
chargeable on the majority funerals. Any change
of the Group's services. would apply to the
The introduction of such industry as a whole
a tax could therefore significantly and not just the
increase the cost to clients Group.
of the Group's services.
-------------------------------------- ---------------------------- -------------------------- ---------------
Regulation of pre-arranged Any changes would No significant No significant
funeral plans apply to the industry changes noted change
Pre-arranged funeral plans as a whole and not in the period.
are not a regulated product, just the 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.
-------------------------------------- ---------------------------- -------------------------- ---------------
Regulation of the funeral The Group already The Government No significant
industry operates at a very has now responded change
The Scottish and Westminster high standard, using to the Westminster
parliaments have set up an facilities appropriate inquiry. No material
inquiry to consider issues for the dignified changes to the
surrounding funeral poverty. care of the deceased. market are expected
in the foreseeable
The Scottish Government is future.
seeking to enact new legislation.
Amongst other things, this
could lead to the licensing
of funeral directors in Scotland
and the appointment of a
Scottish Inspector of funerals.
Regulation would most likely
result in increased compliance
costs for the industry as
a whole.
-------------------------------------- ---------------------------- -------------------------- ---------------
Changes in the funding of There is considerable The latest actuarial No significant
the pre-arranged funeral regulation around valuation of the change
plan business insurance companies pre-arranged funeral
The Group has given commitments which is designed, plan trusts confirmed
to pre-arranged funeral plan amongst other things, that the Trusts
members to provide certain to ensure that the continue to have
funeral services in the future. insurance companies sufficient assets.
meet their obligations.
Funding for these plans is Current low gilt
reliant on either insurance The Trusts hold assets yields may mean
companies paying the amounts with the objective that the resulting
owed or the pre-arranged of achieving returns increase in the
funeral plan Trusts having slightly in excess present value
sufficient assets. of inflation. of the liabilities
in the valuation
If this is not the case, prepared as of
then the Group may receive the end of September
a lower amount per funeral 2016 causes an
than expected and thus generate actuarial deficit.
lower profits. However the average
assets per plan
is still expected
to be robust.
-------------------------------------- ---------------------------- -------------------------- ---------------
Financial risk management
Risk and impact Mitigating activities 2016 commentary Change ------------------------------------- ----------------------- ---------------- --------------- Financial Covenant under The nature of the No significant No significant the Secured Notes Group's debt means changes noted change The Group's Secured Notes that the denominator in the period. requires EBITDA to total is now fixed unless debt service to be above further Secured Notes 1.5 times. If this financial are issued in the covenant (which is applicable future. This means to the securitised subgroup that the covenant of Dignity) is not achieved, headroom will change then this may lead to an proportionately with Event of Default under the changes in EBITDA terms of the Secured Notes, generated by the which could result in the securitised subgroup. Security Trustee taking control of the securitisation group on behalf of the Secured 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 24 June 2016
52 week
period
ended
26 week period 25 Dec
ended 2015
-----------------
24 Jun 26 Jun (audited)
2016 2015
Note GBPm GBPm GBPm
-------------------------------------------- ----- -------- ------- ----------
Revenue 2 158.0 158.7 305.3
Cost of sales (62.6) (61.0) (123.3)
Gross profit 95.4 97.7 182.0
Administrative expenses (40.7) (39.5) (86.5)
Operating profit 2 54.7 58.2 95.5
Analysed as:
Underlying operating profit 2 55.6 59.7 98.7
Profit on sale of fixed assets 0.1 - -
External transaction costs (1.0) (1.5) (3.2)
Operating profit 54.7 58.2 95.5
Finance costs 3 (13.4) (13.4) (27.0)
Finance income 3 0.2 0.2 0.5
Profit before tax 2 41.5 45.0 69.0
Taxation - before exceptional items 4 (8.9) (10.0) (15.5)
Taxation - exceptional 4 - - 3.4
Taxation 4 (8.9) (10.0) (12.1)
Profit for the period attributable to
equity shareholders 32.6 35.0 56.9
-------------------------------------------- ----- -------- ------- ----------
Earnings per share for profit attributable
to equity shareholders
* Basic (pence) 5 65.9p 71.0p 115.2p
* Diluted (pence) 5 65.7p 70.9p 114.5p
Underlying earnings per share (pence) 5 67.7p 74.0p 114.8p
Consolidated statement of comprehensive income (unaudited)
for the 26 week period ended 24 June 2016
52 week
period
ended
26 week period 25 Dec
ended 2015
----------------------
24 Jun 26 Jun (audited)
2016 2015
GBPm GBPm GBPm
------------------------------------------ ---------- ---------- ----------
Profit for the period 32.6 35.0 56.9
Items that will not be reclassified
to profit or loss
Remeasurement (loss)/ gain on retirement
benefit obligations (2.1) 1.8 (1.4)
Tax credit/ (charge) on remeasurement
of retirement
benefit obligations 0.4 (0.4) 0.3
Restatement of deferred tax for the
change in UK tax rate - - (0.2)
Other comprehensive (loss)/ gain (1.7) 1.4 (1.3)
Comprehensive income for the
period 30.9 36.4 55.6
Attributable to:
Equity shareholders of the parent 30.9 36.4 55.6
Consolidated balance sheet (unaudited)
balance sheet (unaudited)
as at 24 June 2016
24 Jun 26 Jun 25 Dec
2016 2015 15 (audited)
Note GBPm GBPm GBPm
-------------------------------- ----- --------- ----------- --------------
Assets
Non-current assets
Goodwill 203.0 185.0 201.5
Intangible assets 129.8 99.1 126.7
Property, plant and equipment 200.2 194.7 200.6
Financial and other assets 10.8 10.2 10.3
543.8 489.0 539.1
Current assets
Inventories 6.0 6.2 6.4
Trade and other receivables 32.6 32.0 31.9
Cash and cash equivalents 7 120.7 123.1 98.8
159.3 161.3 137.1
Total assets 703.1 650.3 676.2
Liabilities
Current liabilities
Financial liabilities 8.5 8.1 8.3
Trade and other payables 66.6 62.0 67.5
Current tax liabilities 5.0 7.3 5.4
Provisions for liabilities 1.4 1.2 1.5
81.5 78.6 82.7
Non-current liabilities
Financial liabilities 590.3 598.7 594.6
Deferred tax liabilities 25.3 17.0 21.7
Other non-current liabilities 2.7 2.9 2.3
Provisions for liabilities 6.4 5.1 6.3
Retirement benefit obligation 15.0 9.0 12.5
639.7 632.7 637.4
Total liabilities 721.2 711.3 720.1
Shareholders' equity
Ordinary share capital 6.1 6.1 6.1
Share premium account 7.0 4.8 4.8
Capital redemption reserve 141.7 141.7 141.7
Other reserves (4.7) (6.0) (4.5)
Retained earnings (168.2) (207.6) (192.0)
Total equity (18.1) (61.0) (43.9)
Total equity and liabilities 703.1 650.3 676.2
Consolidated statement of changes in equity (unaudited)
as at 24 June 2016
Ordinary Share Capital
share Premium redemption Other Retained
capital account reserve reserves earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- -------- ----------- --------- --------- --------
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(1) - 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)
Profit for the 26 weeks ended
25 December 2015 - - - - 21.9 21.9
Remeasurement loss on defined
benefit obligations - - - - (3.2) (3.2)
Tax on pensions - - - - 0.7 0.7
Restatement of deferred tax
for the change in UK tax rate - - - - (0.2) (0.2)
-------------------------------- --------- -------- ----------- --------- --------- --------
Total comprehensive income - - - - 19.2 19.2
Effects of employee share
options - - - 1.4 - 1.4
Tax on employee share options - - - 0.2 - 0.2
Restatement of deferred tax
for the change in UK tax rate - - - (0.1) - (0.1)
Dividends (note 6) - - - - (3.6) (3.6)
Shareholders' equity as at
25 December 2015 6.1 4.8 141.7 (4.5) (192.0) (43.9)
Profit for the 26 weeks ended
24 June 2016 - - - - 32.6 32.6
Remeasurement loss on defined
benefit obligations - - - - (2.1) (2.1)
Tax on pensions - - - - 0.4 0.4
-------------------------------- --------- -------- ----------- --------- --------- --------
Total comprehensive income - - - - 30.9 30.9
Effects of employee share
options - - - 1.7 - 1.7
Tax on employee share options - - - 0.3 - 0.3
Proceeds from share issue(2) - 2.2 - - - 2.2
Gift to Employee Benefit Trust - - - (2.2) - (2.2)
Dividends (note 6) - - - - (7.1) (7.1)
Shareholders' equity as at
24 June 2016 6.1 7.0 141.7 (4.7) (168.2) (18.1)
(1) Relating to issue of 249,067 shares under 2012 LTIP scheme and 1,044 shares under 2013 SAYE scheme.
(2) Relating to issue of 213,851 shares under 2013 LTIP scheme and 353 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 24 June 2016 52 week
26 week period period
ended ended
25 Dec
2015
------- ---------
24 Jun 26 Jun (audited)
2016 2015
Note GBPm GBPm GBPm
------------ ----------------------------------------------- ------ ------- --------- ----------
Cash flows from operating activities
Cash generated from operations before
external transaction costs 9 64.6 71.0 125.2
External transaction costs in respect
of acquisitions (0.6) (0.6) (3.2)
Cash generated from operations 64.0 70.4 122.0
Finance income received 0.3 0.3 0.6
Finance costs paid (13.2) (5.9) (19.1)
Transfer from restricted bank accounts for finance costs 12.8 5.6 5.6 Payments to restricted bank accounts for finance costs (12.7) (12.8) (12.8) Total payments in respect of finance costs (13.1) (13.1) (26.3) Tax (paid) / refund (5.3) 0.8 (3.7) Net cash generated from operating activities 45.9 58.4 92.6 Cash flows from investing activities Acquisition of subsidiaries and businesses (net of cash acquired) 11 (6.0) (10.1) (50.0) Proceeds from sale of property, plant and equipment 0.5 0.5 0.8 Vehicle replacement programme and improvements to locations (5.9) (5.6) (15.6) Branch relocations (0.8) (3.1) (3.9) Satellite locations (0.4) - (0.3) Development of new crematoria and cemeteries - (0.1) (0.1) Purchase of property, plant and equipment (7.1) (8.8) (19.9) Net cash used in investing activities (12.6) (18.4) (69.1) Cash flows from financing activities Issue costs in respect of borrowings and Secured Notes - (0.1) (0.1) Issue costs in respect of debt facility - (0.1) (0.2) Proceeds from share issue - - - Repayment of borrowings (4.2) (4.0) (8.1) Transfer from restricted bank accounts for repayment of borrowings 4.1 4.0 4.0 Payments to restricted bank accounts for repayment of borrowings (4.2) (4.1) (4.1) Total payments in respect of borrowings (4.3) (4.1) (8.2) Dividends paid to shareholders on Ordinary Shares 6 (7.1) (6.4) (10.0) Net cash used in financing activities (11.4) (10.7) (18.5) Net increase in cash and cash equivalents 21.9 29.3 5.0 Cash and cash equivalents at the beginning of the period 81.9 76.9 76.9 Cash and cash equivalents at the end of the period 7 103.8 106.2 81.9 Restricted cash 7 16.9 16.9 16.9 Cash and cash equivalents at the end of the period as reported in the consolidated balance sheet 7 120.7 123.1 98.8 -------------------------------------------------------- --- ------ ------- --------- ----------
Notes to the interim financial information 2016 (unaudited)
for the 26 week period ended 24 June 2016
1 Accounting policies
The principal accounting policies adopted in the preparation of these financial statements 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 24 June 2016 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 53 week period ended 30 December 2016. They do 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 25 December 2015. The Directors approved this interim condensed consolidated financial information on 27 July 2016.
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 25 December 2015, 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 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 management in applying the Group's accounting policies and key source of estimation uncertainty were the same as those applied to the audited consolidated financial statements as at and for the 52 week period ended 25 December 2015. Comparative information has been presented as at and for the 26 week period ended 26 June 2015, and as at and for the 52 week period ended 25 December 2015.
The comparative figures for the 52 week period ended 25 December 2015 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 25 December 2015 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 net 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.
2 Revenue and segmental analysis (continued)
The revenue and operating profit/ (loss), by segment, was as follows:
26 week period ended 24 June 2016
Profit on
Underlying sale of
operating fixed assets,
profit/ external
(loss) Underlying transaction
before operating costs and Operating
depreciation Depreciation profit/ exceptional profit/
Revenue and amortisation and amortisation (loss) items (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- ----------------- ------------------ ----------- --------------- ------------
Funeral services 111.6 49.7 (5.6) 44.1 (1.0) 43.1
Crematoria 32.5 20.0 (1.7) 18.3 0.1 18.4
Pre-arranged funeral
plans 13.9 4.1 (0.1) 4.0 - 4.0
Central overheads - (10.4) (0.4) (10.8) - (10.8)
Group 158.0 63.4 (7.8) 55.6 (0.9) 54.7
Finance costs (13.4) - (13.4)
Finance income 0.2 - 0.2
Profit before tax 42.4 (0.9) 41.5
Taxation (8.9) - (8.9)
Underlying earnings for
the period 33.5
Total other items (0.9)
Profit after taxation 32.6
Earnings per share for profit attributable to equity shareholders
- Basic (pence) 67.7p 65.9p
- Diluted (pence) 67.5p 65.7p
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
- Basic (pence) 74.0p 71.0p
- Diluted (pence) 73.9p 70.9p
2 Revenue and segmental analysis (continued)
52 week period ended 25 December
2015
Profit on
Underlying sale of
operating fixed assets,
profit/ external
(loss) Underlying transaction
before operating costs and Operating
depreciation Depreciation profit/ exceptional profit/
Revenue and amortisation and amortisation (loss) items (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ -------- ------------------ ------------------ ----------- --------------- ----------
Funeral services 212.6 87.4 (10.6) 76.8 (3.2) 73.6
Crematoria 63.1 37.8 (3.2) 34.6 - 34.6
Pre-arranged funeral
plans 29.6 8.0 (0.2) 7.8 - 7.8
Central overheads - (19.9) (0.6) (20.5) - (20.5)
Group 305.3 113.3 (14.6) 98.7 (3.2) 95.5
Finance costs (27.0) - (27.0)
Finance income 0.5 - 0.5
Profit before tax 72.2 (3.2) 69.0
Taxation - continuing
activities (15.5) - (15.5)
Taxation - exceptional - 3.4 3.4
Taxation (15.5) 3.4 (12.1)
Underlying earnings
for the period 56.7
Total other items 0.2
Profit after taxation 56.9
Earnings per share for profit attributable
to equity shareholders
- Basic (pence) 114.8p 115.2p
- Diluted (pence) 114.1p 114.5p
3 Net finance costs
52 week
26 week period period ended
ended
--------------------------
24 26 Jun 25 Dec
Jun 2015 2015
2016
GBPm GBPm GBPm
-------------------------------------------------- ------------ ------------ ------------ -----------
Finance costs
New Notes 12.4 12.5 25.0
Crematoria Acquisition Facility 0.3 0.3 0.6
Other loans 0.5 0.5 0.9
Net finance cost on retirement benefit obligations 0.2 - 0.3
Unwinding of discounts - 0.1 0.2
Finance costs 13.4 13.4 27.0
Finance income
Bank deposits (0.2) (0.2) (0.5)
Finance income (0.2) (0.2) (0.5)
Net finance costs 13.2 13.2 26.5
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 21.0 per cent (2015: 21.5 per cent) on profit before tax for the 26 week period ended 24 June 2016.
52 week
26 week period period
ended ended
--------------------
24 Jun 26 Jun 25 Dec
2016 2015 2015
GBPm GBPm GBPm
------------------------ -------------------- ------ --------- --------- --------
Taxation 8.9 10.0 12.1
---------------------------------------------- ------ --------- --------- --------
The standard rate of Corporation Tax in the UK changed from 21 per cent to 20 per cent from 1 April 2015. In addition, changes have been substantively enacted that will mean the standard rate will reduce further to 19 per cent from 1 April 2017 and 18 per cent from 1 April 2020. Further rate changes are possible. Each percentage point reduction in Corporation Tax rate is expected to reduce the deferred tax liability by approximately GBP1.4 million.
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.
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 24 June 2016
Underlying profit after taxation and EPS 33.5 49.5 67.7
Less: Profit on sale of fixed assets and external
transaction costs
(net of taxation of GBPnil million) (0.9)
Profit attributable to shareholders - Basic
EPS 32.6 49.5 65.9
Profit attributable to shareholders - Diluted
EPS 32.6 49.6 65.7
26 week period ended 26 June 2015
Underlying profit after taxation and EPS 36.5 49.3 74.0
Less: 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
--------------------------------------------------- --------- ----------- ----------
52 week period ended 25 December 2015
Underlying profit after taxation and EPS 56.7 49.4 114.8
Add: Exceptional items, loss on sale of fixed
assets and
external transaction costs (net of taxation
of GBPnil million) 0.2
Profit attributable to shareholders - Basic
EPS 56.9 49.4 115.2
--------------------------------------------------- --------- ----------- ----------
Profit attributable to shareholders - Diluted
EPS 56.9 49.7 114.5
6 Dividends
On 24 June 2016, the Group paid a final dividend, in respect of 2015, of 14.31 pence per share (2015: 13.01 pence per share) totalling GBP7.1 million (2015: GBP6.4 million).
On 27 July 2016, the Directors declared an interim dividend, in respect of 2016, of 7.85 pence per share (2015: 7.14 pence per share) totalling GBP3.9 million (2015: GBP3.5 million), which will be paid on 28 October 2016 to those shareholders on the register at the close of business on 23 September 2016.
7 Cash and cash equivalents
24 Jun 26 Jun 25 Dec
2016 2015 2015
Note GBPm GBPm GBPm
Operating cash as reported in the consolidated
statement of
cash flows as cash and cash equivalents 103.8 106.2 81.9
Amounts set aside for debt service payments (a) 16.9 16.9 16.9
Cash and cash equivalents as reported in
the balance sheet 120.7 123.1 98.8
(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 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 2016 this amount was used to pay these respective parties on 30 June 2016 and in December 2015 this amount was used to pay these respective parties on 31 December 2015. Of this amount GBP12.7 million (December 2015: GBP12.8 million) is shown within the Statement of Cash Flows as 'Payments to restricted bank accounts for finance costs' and GBP4.2 million (December 2015: GBP4.1 million) is shown within 'Financing activities' as 'Payments to restricted bank accounts for repayment of borrowings'.
8 Net debt
24 Jun 26 Jun 25 Dec
2016 2015 2015
GBPm GBPm GBPm
Net amounts owing on New Notes (582.4) (590.6) (586.5)
Add: unamortised issue costs (0.7) (0.7) (0.7)
Gross amounts owing on Secured Notes per
financial statements (583.1) (591.3) (587.2)
Net amounts owing on Crematoria Acquisition
Facility
per financial statements (15.7) (15.6) (15.7)
Add: unamortised issue costs on Crematoria
Acquisition Facility (0.1) (0.2) (0.1)
Gross amounts owing (598.9) (607.1) (603.0)
Accrued interest on Secured Notes (12.7) (12.9) (12.8)
Accrued interest on Crematoria Acquisition
Facility - - (0.1)
Cash and cash equivalents 120.7 123.1 98.8
Net debt (490.9) (496.9) (517.1)
In addition to the above, the consolidated balance sheet also includes finance lease obligations and other financial liabilities which totalled GBP0.7 million (June 2015: GBP0.7m; December 2015: 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 24 June 2016, the actual ratio was 3.19 times (June 2015: 4.37 times; December 2015: 3.35 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 was 3.38 times in June 2015 and 2.95 times in December 2015.
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
-----------------
24 Jun 26 Jun 25 Dec
2016 2015 2015
GBPm GBPm GBPm
------------------------------------------------ -------- ------- --------
Net profit for the period 32.6 35.0 56.9
Adjustments for:
Taxation 8.9 10.0 12.1
Net finance costs 13.2 13.2 26.5
(Profit)/ loss on disposal of fixed assets (0.1) - -
Depreciation charges 7.7 7.0 14.5
Amortisation of intangibles 0.1 0.1 0.1
Movement in inventories 0.5 0.3 0.1
Movement in trade receivables 0.7 (1.6) (1.6)
Movement in trade payables (0.4) 0.9 3.2
External transaction costs 1.0 1.5 3.2
Changes in other working capital (excluding
acquisitions) (1.5) 3.6 7.8
Employee share option charges 1.9 1.0 2.4
Cash generated from operations before external
transaction costs 64.6 71.0 125.2
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 25 December 2015. 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 of current and non-current financial assets and liabilities
24 Jun 2016 26 Jun 2015 25 December 2015
Nominal Book Fair Nominal Book Fair value Nominal Book Fair
value value value value value GBPm value value value
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
New A Notes -
3.5456% maturing
31 December 2034 226.7 226.4 246.5 234.9 234.6 238.4 230.8 230.5 238.7
New B Notes -
4.6956% maturing
31 December 2049 356.4 356.0 406.4 356.4 356.0 376.5 356.4 356.0 376.8
Crematoria
Acquisition
Facility 15.8 15.7 15.8 15.8 15.7 15.8 15.8 15.7 15.8
Finance leases 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7
Total 599.6 598.8 669.4 607.8 607.0 631.4 603.7 602.9 632.0
The Crematoria Acquisition Facility and New A and New B Notes are held at amortised cost. Finance lease payables represent the present value of future minimum lease payments. Other categories of financial instruments include trade receivables and trade payables, however there is no difference between the book value and fair value of these items.
The fair values of the New A and New B Notes are their market value at the balance sheet date and are considered to be level 1.
The fair value of the Crematoria Acquisition Facility is considered to be nominal value, given the nature of the loan and the source of the cash flows support its repayment and is considered to be level 3.
11 Acquisitions and disposals
(a) Acquisition of subsidiary and other businesses
Provisional
fair value
GBPm
Property, plant and equipment 1.0
Intangible assets: trade names 3.0
Receivables 0.1
Other working capital 0.1
Deferred taxation (0.3)
Net assets acquired 3.9
Goodwill arising 1.5
5.4
Satisfied by:
Cash paid on completion (funded from internally generated cash flows) 5.4
During 2016, the Group acquired the operational interest of six funeral locations.
The residual excess of the consideration paid over the net assets acquired is recognised as goodwill. This goodwill represents future benefits to the Group in terms of revenue, market share and delivering the Group's strategy.
The fair values ascribed reflect provisional amounts, which will be finalised once acquisition working capital balances have been converted into cash. These fair values reflect the recognition of trade names and associated deferred taxation, and adjustments to reflect the fair value of other working capital items such as receivables, inventories and accruals which are immaterial.
Each acquisition made followed the Group's strategy to acquire locations that will help the Group grow and create value for shareholders.
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 5.4
Cash paid in respect of prior year acquisitions 0.6
Acquisition of subsidiaries and businesses as reported
in the Cash flow statement 6.0
(c) Acquisition and disposals of property, plant and equipment
In addition to the above, there were additions in relation to crematoria developments totalling GBPnil million (June 2015: GBP0.1 million; December 2015: GBP0.1 million) and GBP7.1 million (June 2015: GBP8.7 million; December 2015: GBP19.8 million) of other additions to property, plant and equipment in the period. The Group also received proceeds of GBP0.5 million (June 2015: GBP0.5 million; December 2015: GBP0.8 million) from disposals of property, plant and equipment, which had a net book value of GBP0.4 million (June 2015: GBP0.5 million; December 2015: GBP0.5 million).
The Group had capital expenditure authorised by the Board and contracted for at the balance sheet date of GBP19.5 million (June 2015: GBP13.7 million; December 2015: GBP7.7 million) in respect of property, plant and equipment.
12 Pre-arranged funeral plan trust
During the period, the Group entered into transactions with the National Funeral Trust, the Trust for Age UK Funeral Plans and the Dignity Limited Trust Fund (the 'Principal Trusts') and the trusts related to businesses acquired since 2013 ('Recent Trusts') (and collectively, the 'Trusts') associated with the pre-arranged funeral plan businesses. The nature of the relationship with the Trusts is set out in the Group's 2015 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 (which are recognised by the Group as revenue within the pre-arranged funeral plan division at the time of the sale); and
-- Receipts from the Trusts in respect of funerals provided (which are recognised by the Group as revenue within the funeral division when the funeral is performed).
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
Transactions during Group at the period
the period end
----- ----------------------------- -----------------------------
52 week 52 week
26 week period period 26 week period period
ended ended ended ended
-------------------- -------------------
24 26 25 Dec 24 26 Jun 25 Dec
Jun Jun 2015 Jun 2015 2015
2016 2015 2016
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ---- ---------- -------- -------- -------- --------- --------
Dignity Limited Trust Fund 0.2 0.2 0.3 - - -
National Funeral Trust 22.7 20.9 41.5 4.6 2.0 4.7
Trust for Age UK Funeral Plans 19.5 19.9 38.5 3.5 1.7 4.6
Recent Trusts 1.3 1.1 2.0 0.2 - 0.4
--------------------------------------- --------- -------- -------- -------- --------- --------
Total 43.7 42.1 82.3 8.3 3.7 9.7
--------------------------------------- --------- -------- -------- -------- --------- --------
Amounts due to the Group from the Trusts are included in Trade and other receivables.
13 Post balance sheet events
On 27 June 2016, the Group completed the acquisition of three freehold crematoria locations and on 22 July 2016, the Group completed the acquisition of the leasehold location in Shropshire, all as part of the agreement announced on 31 May 2016 to acquire a total of five locations from Funeral Services Limited (trading as Co-op Funeralcare). 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.
The Group has also acquired one funeral location since the balance sheet date.
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 period. Traditionally, the first half of the financial period 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 2016 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 2016 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
David Blackwood - Non-Executive Director
Jane Ashcroft - Non-Executive Director
Martin Pexton - Non-Executive Director
By order of the Board
Steve Whittern
Finance Director
27 July 2016
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 24 June 2016 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 24 June 2016 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
27 July 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BRGDRSBDBGLL
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July 27, 2016 02:01 ET (06:01 GMT)
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