REG - Dignity PLC - Interim Results <Origin Href="QuoteRef">DTY.L</Origin> - Part 3
27/07/2016 07:06
- Part 3: For the preceding part double click ID:nRSa3175Fb
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 £nil 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 £7.1 million (2015:
£6.4 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 £3.9
million (2015: £3.5 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 £m £m £m
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 £12.7
million (December 2015: £12.8 million) is shown within the Statement of Cash
Flows as 'Payments to restricted bank accounts for finance costs' and £4.2
million (December 2015: £4.1 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
£m £m £m
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 £0.7 million
(June 2015: £0.7m; December 2015: £0.7 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
£33.7 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 ended period ended
24 Jun 2016 26 Jun 2015 25 Dec 2015
£m £m £m
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 value £m Book value £m Fair value £m Nominal value £m Book value£m Fair value£m Nominal value £m Book value£m Fair value £m
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
£m
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
£m
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 £nil million (June 2015: £0.1 million; December 2015:
£0.1 million) and £7.1 million (June 2015: £8.7 million; December 2015: £19.8
million) of other additions to property, plant and equipment in the period.
The Group also received proceeds of £0.5 million (June 2015: £0.5 million;
December 2015: £0.8 million) from disposals of property, plant and equipment,
which had a net book value of £0.4 million (June 2015: £0.5 million; December
2015: £0.5 million).
The Group had capital expenditure authorised by the Board and contracted for
at the balance sheet date of £19.5 million (June 2015: £13.7 million; December
2015: £7.7 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 the period Group at the period end
26 week period ended 52 week period ended 26 week period ended 52 week period ended
24 Jun 2016 26 Jun 2015 25 Dec 2015 24 Jun 2016 26 Jun 2015 25 Dec 2015
£m £m £m £m £m £m
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
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