TIDMDTY
RNS Number : 0081C
Dignity PLC
17 February 2022
FOR IMMEDIATE RELEASE 17 FEBRUARY 2022
Dignity PLC
("Dignity", the "Company" or the "Group")
TRADING UPDATE AND CONSENT SOLICITATION WITH BONDHOLDERS
Dignity, the UK's only listed provider of funeral related
services, provides a trading update for the year ended 31 December
2021 and notes the announcement made today by Dignity Finance plc
("Dignity Finance"), a Group subsidiary, of the launch of a consent
solicitation period with its Bondholders in relation to a proposed
temporary covenant waiver.
Trading update
For the year ended 31 December 2021, the Board expects
underlying operating profit to be c.GBP54.7 million (2020
restated(1) : GBP60.3 million). Summary details of underlying
operating profit for Q4 and EBITDA for the Group are set out in the
tables below.
The COVID-19 pandemic has been a period of significant
disruption for the wider funeral market, with various government
restrictions limiting the Group's business activities, whilst the
elevated death rate has driven a higher number of funerals and
cremations in 2021 compared to the five-year average of 590,000
deaths per year. Details of the death rate and the impact on
profits are disclosed in the tables below.
As disclosed at the interim results on 21 September 2021,
Dignity intends to change the way it reports results to reflect the
new strategy set out at the 2021 AGM. Full details will be provided
in the preliminary results announcement on 23 March 2022.
Consent solicitation period
As stated in the Group's interim results on 21 September 2021,
the Board continues to work on its plans to improve the Group's
capital structure in the pursuit of the best long-term value for
shareholders.
The Group's primary financial covenant under its secured notes
requires EBITDA to total debt service to be above 1.5 times.
Throughout the last 12 months the Group's performance delivered
significant headroom in relation to its financial covenants. The
ratio at 31 December 2021 was 2.09 times (June 2021: 2.12 times;
December 2020: 1.99 times). As at 31 December 2021, the Group
therefore had EBITDA headroom of approximately GBP20 million
against its financial covenants. A breach of the covenant does not
give rise to an immediate requirement to repay the associated
borrowings. Rather, such a breach results in a requirement for the
bond trustees to appoint a financial adviser who will review the
financial and operational circumstances of the securitised group
prior to making recommendations as to how the breach can be
resolved.
Whilst the Group's financial performance has delivered headroom
in relation to financial covenants throughout the last 12 months,
given the distorting impact of the pandemic on the timing of
deaths, there remains significant uncertainty around the UK death
rate in the near term. Therefore, the Board has taken the prudent
decision to seek a temporary waiver of the abovementioned financial
covenant on a precautionary basis in relation to Dignity Finance's
debt obligations.
Dignity Finance has accordingly launched a consent solicitation
period with its Class A Noteholders. Further information on the
consent solicitation process can be found within the announcement
made by Dignity Finance and a further announcement will be made, as
appropriate, in due course.
As part of the consent solicitation process, the waiver proposal
has been considered by a special committee (the "Special
Committee") consisting of bondholders and convened by The
Investment Association at the request of Dignity Finance. The
members of the Special Committee, who hold in aggregate
approximately 70 per cent of the current principal amount
outstanding of the Class A Notes have examined the proposal, and
have informed Dignity Finance that they find it acceptable.
As a condition to the waiver requested, Dignity will be required
to inject up to a maximum of GBP15 million in cash into the
securitised group over the 12 month waiver period to restore the
EBITDA:DSCR calculation to at least 1.5:1, if it falls below this
level. Any amount injected for this purpose can be used at
Dignity's discretion within the terms of the securitised group,
including being returned to Dignity after the waiver period as soon
as the normal 1.85x DSCR dividend lock trigger is satisfied.
Gary Channon, Chief Executive of Dignity, commented: "The Group
delivered a resilient performance in 2021 despite continuing market
disruption from Covid-19. Whilst it is still early days, we are
confident that the ongoing strategic changes at Dignity will
position the business to grow and to best serve families for their
end-of-life needs. We look forward to providing a more fulsome
update on progress with these strategic initiatives as part of our
preliminary results in March.
We are thankful for the support of our Noteholders as we seek
this covenant waiver which will allow us to continue to implement
these important strategic changes despite the uncertain backdrop of
the Covid-19 pandemic. I would like to call out the ongoing heroic
efforts of our colleagues in dealing with the impact on the
organisation of the elevated death rate at a time of staff
shortages due to the pandemic. Serving families remains our driving
purpose."
For further information please contact:
Gary Channon, Chief Executive
Dean Moore, Interim Chief Financial
Officer
Dignity plc +44 (0)20 7466 5000
Richard Oldworth
Chris Lane
Tilly Abraham
Verity Parker
Buchanan +44 (0) 207 466 5000
www.buchanan.uk.com Dignity@buchanan.uk.com
Notes
(1) Underlying performance measures have been restated to
reflect the application of IFRS 16, Leases. This standard was
adopted in 2020 using the modified retrospective adoption which
meant 2019 comparatives were not restated. As a result, the Group
chose to exclude it from its underlying performance measures
reported in 2020 in order to retain comparability. Therefore, the
underlying performance measures reported in this announcement in
both periods includes the application of IFRS 16.
(2) Alternative performance measures ('APMs')
All measures marked as underlying throughout this announcement
are alternative performance measures. The Board believes that
whilst statutory reporting measures provide financial performance
of the Group under GAAP, APMs are necessary to enable users of the
financial statements to fully understand the trading performance
and financial position of the business. The APMs provided are
aligned with those used in the day-to-day management of the
business and allow for greater comparability across periods. For
this reason, the APMs provided exclude the impact of consolidating
the Trusts and the changes which relate to the application of IFRS
15, all of which are considered to mask the underlying trading
performance of the Group, as well as non-underlying items
comprising certain non-recurring and non-trading transactions.
(3) Group operating profit - Q4
GBPm
--------------------------------------------------- ------
Underlying operating profit - Q4 2020 restated(1) 12.2
--------------------------------------------------- ------
Impact from
--------------------------------------------------- ------
Number of deaths(2) (3) 6.7
--------------------------------------------------- ------
Market share(2) 2.4
--------------------------------------------------- ------
Average revenues(2) (7.6)
--------------------------------------------------- ------
Cost base changes (2.4)
--------------------------------------------------- ------
Underlying operating profit - Q4 2021 11.3
--------------------------------------------------- ------
(1) See note 1 above
(2) Revenue impact
(3) At the marginal level, a high proportion of the impact to
changes in the death rate on revenue falls through to
profitability
(4) UK deaths - Q4
2021 2020 Increase/
(decrease)
(per
cent)
Quarter 1 204,000 161,000 27
Quarter 2 136,000 207,000 (34)
First half of year 340,000 368,000 (8)
Quarter 3 143,000 130,000 10
Quarter 4 181,000 165,000 10
Full year 664,000 663,000 (0)
(5) Bridge between Group Operating Profit and Securitisation Group EBITDA
2020
restated
GBPm 2021 GBPm
-------------------------------------------------------------------------- ---------- ----------
EBITDA per convenant calculation - Securitisation Group 67.6 70.9
-------------------------------------------------------------------------- ---------- ----------
Add: EBITDA of entities outside Securitisation Group 9.8 1.4
-------------------------------------------------------------------------- ---------- ----------
Less: Non-cash items (1.9) (1.4)
-------------------------------------------------------------------------- ---------- ----------
Add: Impact of IFRS 16 13.8 12.8
-------------------------------------------------------------------------- ---------- ----------
Underlying operating profit before depreciation and amortisation - Group 89.3 83.7
-------------------------------------------------------------------------- ---------- ----------
Underlying depreciation and amortisation (29.0) (29.0)
-------------------------------------------------------------------------- ---------- ----------
Underlying operating profit - Group 60.3 54.7
-------------------------------------------------------------------------- ---------- ----------
(6) Underlying cash balances
Underlying cash held of GBP56 million at Dignity plc of which
GBP11 million held within the Securitisation Group as at 31
December 2021
Forward-looking statements
This announcement and the Dignity plc investor website may
contain certain 'forward-looking statements' with respect to
Dignity plc ('the Company') and the Group's financial condition,
results of its operations and business, and certain plans,
strategy, objectives, goals and expectations with respect to these
items and the economies and markets in which the Group
operates.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'will',
'would', 'expects', 'believes', 'intends', 'plans', 'targets',
'goal' or 'estimates' or, in each case, their negative or other
variations or comparable terminology. Forward-looking statements
are not guarantees of future performance. By their very nature
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
Many of these assumptions, risks and uncertainties relate to
factors that are beyond the Group's ability to control or estimate
precisely. There are a number of such factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements. These
factors include, but are not limited to, changes in the economies
and markets in which the Group operates; changes in the legal,
regulatory and competition frameworks in which the Group operates;
changes in the markets from which the Group raises finance; the
impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of
accounting standards under IFRS, and changes in interest and
exchange rates.
Any forward-looking statements made in this announcement or the
Dignity plc investor website, or made subsequently, which are
attributable to the Company or any other member of the Group, or
persons acting on their behalf, are expressly qualified in their
entirety by the factors referred to above. Each forward-looking
statement speaks only as of the date it is made. Except as required
by its legal or statutory obligations, the Company does not intend
to update any forward-looking statements.
Nothing in this announcement or on the Dignity plc investor
website should be construed as a profit forecast or an invitation
to deal in the securities of the Company.
Legal Entity Identifier number:
Dignity plc - 21380049687CNAYKV483
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END
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