Hi all,
Reading through £DTY's quarterly report from November it looks like they commissioned an independent valuation report on their freehold and long-leasehold crematoria to help the regulation investigation.
"As part of the CMA market investigation, Dignity commissioned Cushman & Wakefield in May 2019 to undertake an independent valuation of the 41 freehold or long-leasehold crematoria properties within the Dignity portfolio. The five crematoria owned by local authorities but managed and operated by Dignity were excluded from the valuation report. The rationale for commissioning this one-off report was to assist the CMA in its market investigation by providing information as to the Direct Replacement Cost of each of crematoria owned by Dignity as well as providing an estimate as the Cost of Replacement of the Land or an alternative land use valuation.
The independent valuation was commissioned specifically to assist with the CMA's market investigation informed by this approach applied in previous market investigations. As such it is subject to certain limitations and based on a number of conservative assumptions (which are detailed as an appendix to this announcement). Strictly subject to the foregoing, Cushman & Wakefield have estimated that the replacement costs for the land and buildings at these 41 crematoria to be in the region of £461 million. The report also estimates that the alternative use land valuation at these 41 sites is approximately £374 million. This compares to a net book value of approximately £44 million at the time of the report in September 2019."
This seems crazy to me - that the real world value of their crematoria buildings is actually over 10x the net book value on the accounts.
In their accounting policy according to their latest annual report Dignity depreciate buildings at 2-10%pa (land itself is not meant to be depreciated - and is valued at about 1/3 the total cost of the property at purchase).
The net book amount of freehold land and buildings and leasehold land and buildings in 2019 according to the annual report was £144.7m (freehold) + £42.4m (long leasehold) £187.1m. If the same valuation applies to the rest of the property then could their freehold and leasehold actually total over £1871m? Surely not...?
Can somebody help me make sense of this? If this is the case and Dignity is actually sitting on a gold mine of freehold property then that makes a huge difference to how healthy the…
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