REG - Dignity PLC - Interim Results <Origin Href="QuoteRef">DTY.L</Origin> - Part 3
02/08/2017 07:06
- Part 3: For the preceding part double click ID:nRSB8158Mb
taxation of £nil million) (2.2)
Profit attributable to shareholders - Basic EPS 57.2 49.6 115.3
Profit attributable to shareholders - Diluted EPS 57.2 49.9 114.6
6 Dividends
On 30 June 2017, the Group paid a final dividend, in respect of 2016, of 15.74
pence per share (2016: 14.31 pence per share) totalling £7.9 million (2016:
£7.1 million).
On 2 August 2017, the Directors declared an interim dividend, in respect of
2017, of 8.64 pence per share (2016: 7.85 pence per share) totalling £4.3
million (2016: £3.9 million), which will be paid on 27 October 2017 to those
shareholders on the register at the close of business on 21 September 2017.
7 Cash and cash equivalents
30 Jun 24 Jun 30 Dec
2017 2016 2016
£m £m £m
Operating cash as reported in the consolidated statement of
cash flows as cash and cash equivalents 65.4 103.8 66.8
Amounts set aside for debt service payments - 16.9 0.3
Cash and cash equivalents as reported in the balance sheet 65.4 120.7 67.1
Amounts set aside for debt service payments
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 2017 there is no restricted cash as payments were made on
30 June. In December 2016 this amount was used to pay these respective parties
on 3 January 2017. Of this amount £nil million (December 2016: £0.3 million)
is shown within the Statement of Cash Flows as 'Payments to restricted bank
accounts for finance costs'.
8 Net debt
30 Jun 24 Jun 30 Dec
2017 2016 2016
£m £m £m
Net amounts owing on Secured Notes per financial statements (569.5) (582.4) (573.9)
Add: unamortised issue costs (0.7) (0.7) (0.7)
Gross amounts owing on Secured Notes (570.2) (583.1) (574.6)
Net amounts owing on Crematoria Acquisition Facility per financial statements (15.8) (15.7) (15.7)
Add: unamortised issue costs on Crematoria Acquisition Facility - (0.1) (0.1)
Gross amounts owing (586.0) (598.9) (590.4)
Accrued interest on Secured Notes - (12.7) (0.3)
Accrued interest on other debt facilities (0.2) - (0.1)
Cash and cash equivalents 65.4 120.7 67.1
Net debt (520.8) (490.9) (523.7)
In addition to the above, the consolidated balance sheet also includes finance
lease obligations and other financial liabilities which totalled £0.7 million
(June 2016: £0.7m; December 2016: £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 Secured Notes
requires EBITDA to total debt service ('EBITDA DSCR') to be at least 1.5
times. At 30 June 2017, the actual ratio was 3.41 times (June 2016: 3.19
times; December 2016: 3.37 times).
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
53 week
26 week period ended period ended
30 Jun 2017 24 Jun 2016 30 Dec 2016
£m £m £m
Net profit for the period 36.1 32.6 57.2
Adjustments for:
Taxation 9.2 8.9 14.0
Net finance costs 13.4 13.2 26.5
Profit on disposal of fixed assets - (0.1) (0.1)
Depreciation charges 8.4 7.7 15.9
Amortisation of intangibles 0.5 0.1 0.2
Movement in inventories (0.9) 0.5 0.4
Movement in trade receivables 1.7 0.7 (0.6)
Movement in trade payables (1.6) (0.4) 1.3
External transaction costs 0.8 1.0 4.1
Changes in other working capital (excluding acquisitions) (7.2) (1.5) (1.4)
Employee share option charges 1.5 1.9 3.6
Cash generated from operations before external transaction costs 61.9 64.6 121.1
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 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 30 December 2016. 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
30 Jun 2017 24 Jun 2016 30 December 2016
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
Secured A Notes - 3.5456% maturing 31 December 2034 213.7 213.5 238.9 226.7 226.4 246.5 218.2 217.9 241.8
Secured B Notes - 4.6956% maturing 31 December 2049 356.4 356.0 440.3 356.4 356.0 406.4 356.4 356.0 436.2
Crematoria Acquisition Facility 15.8 15.8 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 586.6 586.0 695.7 599.6 598.8 669.4 591.1 590.3 694.5
The Crematoria Acquisition Facility and Secured 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 Secured 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 3.5
Intangible assets: trade names 12.9
Cash acquired 2.2
Receivables -
Provisions (0.2)
Other working capital (0.1)
Deferred taxation (2.3)
Net assets acquired 16.0
Goodwill arising 7.4
23.4
Satisfied by:
Cash paid on completion (funded from internally generated cash) 21.7
Accrued consideration 1.7
Total consideration 23.4
During 2017, the Group acquired the operational interest of 14 funeral
locations and one crematorium.
The residual excess of the consideration paid over the net assets acquired is
recognised as goodwill, none of which is tax deductible. This goodwill
represents future benefits to the Group in terms of revenue, market share and
delivering the Group's strategy.
The fair 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 such 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 21.7
Cash paid in respect of prior year acquisitions 0.5
Cash acquired on acquisition (2.2)
Acquisition of subsidiaries and businesses as reported in the cash flow statement 20.0
(c) Acquisition and disposals of property, plant and equipment
In addition to the above, there were additions in relation to crematoria
developments totalling £0.9 million (June 2016: £nil million; December 2016:
£0.8 million) and £11.9 million (June 2016: £7.1 million; December 2016: £22.0
million) of other additions to property, plant and equipment in the period.
The Group also received proceeds of £0.4 million (June 2016: £0.5 million;
December 2016: £1.0 million) from disposals of property, plant and equipment,
which had a net book value of £0.4 million (June 2016: £0.4 million; December
2016: £0.7 million).
The Group had capital expenditure authorised by the Board and contracted for
at the balance sheet date of £22 million (June 2016: £19.5 million; December
2016: £8.6 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 2016 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 53 week period ended 26 week period ended 53 week period ended
30 Jun 2017 24 Jun 2016 30 Dec 2016 30 Jun 2017 24 Jun 2016 30 Dec 2016
£m £m £m £m £m £m
Dignity Limited Trust Fund 0.2 0.2 0.3 - - -
National Funeral Trust 25.8 22.7 44.4 7.0 4.6 6.8
Trust for Age UK Funeral Plans 18.8 19.5 36.5 3.7 3.5 4.2
Recent Trusts 2.8 1.3 2.1 0.1 0.2 0.2
Total 47.6 43.7 83.3 10.8 8.3 11.2
Amounts due to the Group from the Trusts are included in Trade and other
receivables.
13 Post balance sheet events
The Group has acquired three funeral locations since the balance sheet date.
See the Business and Financial Review for details of a new revolving credit
facility obtained by the Group in July 2017.
There were no other significant post balance sheet event.
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 Guidance and Transparency Rules, being an
indication of important events that have occurred during the first half of
2017 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 Guidance and Transparency Rules, being
related party transactions that have taken place in the first half of 2017 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
Mary McNamara - Non-Executive Director
By order of the Board
Steve Whittern
Finance Director
2 August 2017
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 30 June 2017
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 Guidance 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 30 June 2017 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted
by the European Union and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Birmingham
2 August 2017
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