REG - Dignity PLC - Interim Results <Origin Href="QuoteRef">DTY.L</Origin> - Part 2
27/07/2016 07:06
- Part 2: For the preceding part double click ID:nRSa3175Fa
result in increased compliance costs for the industry as a whole.
Changes in the funding of the pre-arranged funeral plan businessThe Group has given commitments to pre-arranged funeral plan There is considerable regulation around insurance companies which is designed, amongst other things, to ensure that the insurance companies meet their obligations. The Trusts hold assets with the objective of achieving returns slightly in excess of inflation. The latest actuarial valuation of the pre-arranged funeral plan trusts confirmed that the Trusts continue to have sufficient assets. Current low gilt yields may mean that the resulting increase in the present value of the liabilities in the valuation prepared as of the end of September 2016 causes an actuarial deficit. However the average assets per plan is still expected to be robust. No significant change
members to provide certain funeral services in the future. Funding for these plans is reliant on either insurance companies
paying the amounts owed or the pre-arranged funeral plan Trusts having sufficient assets. If this is not the case, then the
Group may receive a lower amount per funeral than expected and thus generate lower profits.
Financial risk management
Risk and impact Mitigating activities 2016 commentary Change
Financial Covenant under the Secured NotesThe Group's Secured Notes requires EBITDA to total debt service to be above 1.5 times. The nature of the Group's debt means that the denominator is now fixed unless further Secured Notes are issued in the future. This means that the covenant headroom will change proportionately with changes in EBITDA generated by the securitised subgroup. No significant changes noted in the period. No significant change
If this financial covenant (which is applicable to the securitised subgroup of Dignity) is not achieved, then this may lead to
an Event of Default under the terms of the Secured Notes, which could result in the 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 ended 25 Dec 2015
24 Jun 2016 26 Jun 2015 (audited)
Note £m £m £m
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 periodattributable 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 ended 25 Dec 2015
24 Jun 2016 26 Jun 2015 (audited)
£m £m £m
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 2016 26 Jun 2015 25 Dec 15 (audited)
Note £m £m £m
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
£m £m £m £m £m £m
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 £80,002,465 B Shares that were
issued on 2 August 2006 and redeemed for cash on the same day and £19,274,610
B Shares that were issued on 10 October 2010 and redeemed for cash on 11
October 2010, £22,263,112 B Shares that were issued on 12 August 2013 and
redeemed for cash on 20 August 2013 and £20,154,070 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 £12.3 million merger
reserve.
Consolidated statement of cash flows (unaudited)
for the 26 week period ended 24 June 2016 52 week
26 week period ended period ended
25 Dec 2015
24 Jun 2016 26 Jun 2015 (audited)
Note £m £m £m
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
Revenue Underlying operating profit/ (loss) before depreciation and amortisation Depreciation and amortisation Underlying operating profit/ (loss) Profit on sale of fixed assets, external transaction costs and exceptional items Operating profit/ (loss)
£m £m £m £m £m £m
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
Revenue Underlying operating profit/ (loss) before depreciation and amortisation Depreciation and amortisation Underlying operating profit/ (loss) External transaction costs Operating profit/ (loss)
£m £m £m £m £m £m
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
Revenue Underlying operating profit/ (loss) before depreciation and amortisation Depreciation and amortisation Underlying operating profit/ (loss) Profit on sale of fixed assets, external transaction costs and exceptional items Operating profit/ (loss)
£m £m £m £m £m £m
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 ended period ended
24 Jun 2016 26 Jun 2015 25 Dec 2015
£m £m £m
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 ended period ended
24 Jun 2016 26 Jun 2015 25 Dec 2015
£m £m £m
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 £1.4 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:
Earnings Weighted average number of shares Per share amount
£m 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 £nil 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 £nil million) (1.5)
Profit attributable to shareholders - Basic EPS
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